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Strategies & Market Trends : US vs Amr Elgindy - Trial Transcripts

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To: Jeffrey S. Mitchell who wrote (4)9/23/2005 3:26:50 PM
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Day 5: 11/8/04


774



1

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

- - - - - - - - - - - - - - - X

UNITED STATES OF AMERICA, : CR-02-589(S-2) (RJD)

-against- : U.S. Courthouse
Brooklyn, New York
AMR ELGINDY and :
JEFFREY ROYER,
Defendants. : TRANSCRIPT OF TRIAL
November 8, 2004
- - - - - - - - - - - - - - X 9:30 a.m.

BEFORE:
HONORABLE RAYMOND J. DEARIE, U.S.D.J.
And a jury

APPEARANCES:

For the Government: ROSLYNN R. MAUSKOPF, ESQUIRE
United States Attorney
One Pierrepont Plaza
Brooklyn, New York 11201

By: KENNETH BREEN
SETH LEVINE
VALERIE SZCZEPANIK
Assistant U.S. Attorneys


For the Defendant
Elgindy: BARRY BERKE, ESQ.
ERIC TIRSCHWELL, ESQ.
ERIN WALTER, ESQ.
JOEL ISAACSON, ESQ.

Royer: LAWRENCE GERZOG, ESQ.
ILISSA BROWNSTEIN, ESQ.

Court Reporter: Holly Driscoll, CSR
Official Court Reporter
225 Cadman Plaza East
Brooklyn, New York 11201
(718) 260-2469
Proceedings recorded by mechanical stenography, transcript
produced by Computer-Assisted Transcript.


HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



775



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HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



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HOLLY DRISCOLL, CSR
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HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



794



1 (Recess taken.)

2 (The following takes place out of the presence of

3 the jury.)

4 THE COURT: Let me say preliminarily, I read through

5 these IMs that you shared with me. Only one, Government

6 Exhibits 2567, 68, 69, 70, my initial reaction, aside from

7 there being obviously material in here that would have to be

8 redacted in any event consistent with our discussions, is the

9 obvious question, I'm not so much concerned with Mr. Fiero, he

10 doesn't seem to say anything in any event, much less for the

11 truth, but these are either statements in furtherance of the

12 conspiracy or they're clearly inadmissible and that's what

13 you'll have to address before I can admit them.

14 On the face of it, it seems like a little -- oh, I

15 don't know, small talk about the events that are taking place.

16 I'll certainly give you an opportunity to convince me

17 otherwise.

18 MR. BREEN: Okay, thank you.

19 THE COURT: All right. Bring Mr. Cleveland in.

20 MR. LEVINE: Your Honor, there was the issue about

21 the instruction.

22 THE COURT: I made a couple of changes. You'll soon

23 hear it.

24 MR. LEVINE: Yes, sir.

25 MR. BREEN: Are you going to do it right away?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



795



1 THE COURT: No, I'm not going to do it right away.

2 I'm going to wait until the first reference.

3 MR. BREEN: Okay. I'll signal. Is there anything

4 you'd like me to say? Are you going to wait until I actually

5 ask the question or do you want me to signal to you that I'm

6 about to ask the question?

7 THE COURT: No, ask the question. I'm going to do

8 it in an offhanded fashion.

9 MR. BERKE: Judge, there was one open issue about

10 whether the inaccurate claim about the amount of monies we're

11 talking about, whether the government will elicit that. You

12 may have said it, you may have already said no, I just wasn't

13 sure.

14 THE COURT: The amount, I don't think I ruled on the

15 amount.

16 MR. LEVINE: You didn't.

17 MR. BERKE: I think you said you'll think about it.

18 THE COURT: I'm sorry, I want to make sure I'm on

19 the same page. Come on over a second.)

20

21 (The following takes place at side-bar.)

22 THE COURT: Just refresh my recollection, I think I

23 know what you're talking about.

24 MR. BERKE: This was the claim by Cleveland that the

25 amounts that were sold involved I think 30, 40 million or 30



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



796



1 million which is just wrong, it was really 300,000.

2 MR. BREEN: Six million.

3 MR. BERKE: I'm sorry.

4 THE COURT: So, it turns out to be --

5 MR. BREEN: 300,000.

6 THE COURT: All right. I don't have any problem.

7 This is what Cleveland is saying?

8 MR. BREEN: Right.

9 THE COURT: How does he know this?

10 MR. BREEN: Mr. Royer told him.

11 THE COURT: Mr. Royer told him?

12 MR. BREEN: Yeah. I wish he was right about the

13 300,000.

14 THE COURT: So does Mr. Berke.

15 MR. BERKE: But my concern is then that requires us

16 to get into the facts to correct it. Does it really matter

17 what amount, particularly when he's wrong.

18 THE COURT: It is what he said. If you want to

19 stipulate that the amount was in fact 300,000, I'll be happy

20 to tell the jury.

21 THE COURT: You just want to get out of numbers.

22 MR. BERKE: Yes, I just want to say shares

23 THE COURT: Like the honest man note for the record.

24 Well, that's what Royer -- according to Cleveland, that's what

25 Royer told him.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 797



1 MR. BREEN: Yes.

2 THE COURT: I can't change that. I'm going to allow

3 it.

4 (End of side-bar.)

5

6

7 THE COURT: When do you expect your direct will end?

8 Today?

9 MR. BREEN: It could end today or very early

10 tomorrow if not today.

11 THE COURT: All right.

12 (Witness resumes the stand.)

13 (Jury enters courtroom.)

14 THE COURT: Good morning, folks. Please be seated.

15 Thank you for your patience. Time well spent, I assure you.

16 We're ready to resume the direct examination of Mr. Cleveland.

17 I remind you, sir, you've been sworn as a witness

18 and you remain under oath, do you understand that?

19 THE WITNESS: Yes, sir.

20 THE COURT: Mr. Breen.

21 MR. BREEN: Thank you, Your Honor.

22 D E R R I C K C L E V E L A N D, having been previously

23 duly sworn was examined and testified as follows:

24 DIRECT EXAMINATION (CONT'D.)

25 BY MR. BREEN:



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 798



1 Q Good morning, Mr. Cleveland.

2 A Good morning.

3 Q Mr. Cleveland, you testified last week that Mr. Royer's

4 last day of work at the FBI was December 25th, 2001?

5 A Correct.

6 Q Focusing on the period of time before Mr. Royer left the

7 FBI -- during the time when Mr. Royer was still with the FBI,

8 did you discuss with Mr. Royer how he would get information

9 regarding law enforcement information --

10 A Yes.

11 Q -- after he left the FBI?

12 A Yes.

13 Q How many times did you discuss that with him?

14 A Probably four or five times.

15 Q What did you say and what did he say?

16 A I asked Mr. Royer after he left the FBI, you know, how we

17 were going to get information. He told me that he had Lynn,

18 his girlfriend at the time, who was an FBI agent, that she

19 would be able to run names and run companies for us.

20 Q What was Lynn's last name?

21 A Wingate.

22 Q Where did she work?

23 A In the Albuquerque FBI office, Albuquerque, New Mexico.

24 Q What did Mr. Royer say about arrangements he had made

25 with Ms. Wingate?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 799



1 A He had just said that he had talked to her about running,

2 again, names of individuals, names of companies, that she

3 would have no problem doing it.

4 Q Did Mr. Royer mention anybody else?

5 A Yes.

6 Q Who did he mention?

7 A He mentioned a friend of his who was a New Mexico police

8 officer that he had become friends with in his time in the

9 bureau out in New Mexico who also could run names and

10 background checks and things of that nature for us and he said

11 that, you know, if this guy did this, every once in a while we

12 would have to throw him a bone.

13 Q What did you take that to mean?

14 A We'd have to pay him.

15 Q Did Mr. Royer mention any other sources in place?

16 A Yes.

17 Q Who else did he mention?

18 A Doug Gordimer.

19 THE COURT: Sorry, Doug?

20 THE WITNESS: Doing Gordimer, the SEC agent that

21 Royer had befriended in the BBAN investigation.

22 Q Now, did you discuss with Mr. Elgindy how Mr. Royer would

23 still be able to get information after he left the FBI?

24 A Yes.

25 Q How did that come up?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 800



1 A It came up on different occasions. The first time I

2 remember was in the summer of 2001.

3 Q Who brought it up?

4 A Mr. Elgindy.

5 Q What did he say?

6 A We were on the phone talking about Jeff's employment. He

7 asked me just bluntly, you know, if Jeff leaves the Bureau,

8 how are we going to get information and I told Mr. Elgindy

9 that Jeff had his sources in place, that he had Lynn, his

10 girlfriend at the FBI, who could definitely find out most

11 anything that we needed; that he had a friend that was a New

12 Mexico police officer who was also willing to run checks and,

13 of course, we had Gordimer over at the SEC who had already

14 done stuff for us and would continue to do so.

15 Q How many times did you have this discussion with

16 Mr. Elgindy?

17 A About four or five times.

18 Q Did you discuss Mr. Elgindy's questions in that regard

19 with Mr. Royer?

20 A Yes.

21 Q How many times?

22 A Around four or five times. I think each time that it

23 came up I later talked to Jeff about it.

24 Q What did you say and what did Mr. Royer say?

25 A I told Mr. Royer, you know, that I had talked to



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 801



1 Mr. Elgindy, that Mr. Elgindy was asking about, you know, if

2 he leaves the Bureau, you know, how is he going to get

3 information and I told him that I told Mr. Elgindy the ways

4 that we had set out, the sources that were set up to do that

5 and Jeff just kind of laughed about it and said, you know,

6 that's typical Tony being paranoid about this stuff.

7 Q Now, stepping back for a moment, you testified before

8 that Mr. Royer first decided to leave the FBI February 2001?

9 A Correct.

10 Q What was his original starting date?

11 A The original start date was they were talking September

12 to October 2001.

13 Q Do you know who selected that date?

14 A Mr. Elgindy did initially.

15 Q Did Mr. Royer tell you what he felt about that date?

16 A Yes, he on the trip to the airport when he was going --

17 when I rode with him to the airport after the first visit to

18 San Diego he said that he was disappointed, that he was ready

19 to start immediately, but if that's what Tony wanted, then

20 that's what he'd do.

21 Q Was the date moved at all?

22 A Yes.

23 Q By whom?

24 A Mr. Elgindy.

25 Q How many times?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 802



1 A I think it was moved two or three different times.

2 Q Did you speak with Mr. Royer about his feelings about the

3 date being moved?

4 A Yes.

5 Q What did he say?

6 A He was disappointed that the dated continued to be moved.

7 He thought that Mr. Elgindy was dragging him along, worried

8 that once he left the Bureau that he would not be able to get

9 the information, the law enforcement information that he had

10 been providing us, so he felt that Mr. Elgindy was dragging

11 him along to get as much out of him as he possibly could

12 before he left.

13 Also, he had indicated to me that Mr. Elgindy had

14 asked him to write a letter recommending Mr. Elgindy for early

15 release from his probation and Jeff felt that Tony was

16 dragging him out until he had that letter, until Mr. Elgindy

17 had the letter in his hand.

18 Q What was the final start date before Mr. Royer quit the

19 FBI?

20 A Around January 2nd of 2002.

21 Q And, again, Mr. Royer's last day of work was December

22 25th?

23 A Correct.

24 Q Did you speak with Mr. Elgindy about Mr. Royer's new job

25 between December 25th and January 2nd?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 803



1 A Yes.

2 Q How did it come up?

3 A Mr. Elgindy had called me and asked me if I knew where

4 Jeff was, he was having trouble getting in touch with him and

5 I said, well, I said, you know, since his last day at the

6 Bureau was Christmas Day, he went to Colorado and was going to

7 spend a week out there with his family, spend time with his

8 kids and everything and then he's coming out to San Diego and

9 Tony just exploded, he had no idea that Jeff had left the

10 Bureau and started asking me why did he do this. I said,

11 well, I thought it was the plan.

12 He, again, asked me, he was like, well, if he's not

13 in the Bureau, how is he going to get information. I said,

14 Tony, I told you, he's got his sources in place, you know,

15 we've got Lynn, we've got the New Mexico police officer, we

16 have Gordimer at the SEC, we'll still be able to get the same

17 information and he just told me, well, if you hear from him,

18 tell him to give me a call.

19 Q Did your answer to his question cause him to calm at all

20 in his demeanor?

21 A Yes.

22 Q How was the start date resolved?

23 A How was the start date resolved?

24 Q Right. Did he start as he was supposed to start on

25 January 2nd or was there some other date?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 804



1 A It was another date.

2 Q What happened with that?

3 A In the conversation that I had with Tony regarding Jeff

4 leaving the Bureau, the conversation where Mr. Elgindy got

5 upset about him leaving the Bureau, he informed me that he

6 wasn't going to need Jeff until probably the first of February

7 and I said, well, that's okay, Jeff when he decides to leave

8 Colorado, he can come to Oklahoma City and he can stay with my

9 wife and I, we have a bedroom downstairs he can stay in and

10 for the month prior to him going to San Diego I'll teach him,

11 you know, how to read financials, what it is that we look at

12 to determine if a company needs to be looked at or not, you

13 know, and I'll just try to teach him everything I can before

14 he goes out there to work for you.

15 Q Did you tell Mr. Royer about the change in plans?

16 A Yes.

17 Q How did he react?

18 A Disappointed, just kind of laughed, like he wasn't

19 surprised.

20 Q Now, going back in time to when Mr. Royer was still an

21 FBI agent, you testified before that there was an FBI

22 investigation in the Reno office regarding Mr. Elgindy?

23 A Yes.

24 Q And that Mr. Royer said he would straighten it out?

25 A Yes.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 805



1 Q And he was going to monitor it?

2 A Yes.

3 Q Now, after that did there come a time when you learned

4 that Mr. Royer -- from Mr. Royer that Mr. Elgindy was being

5 investigated for something else?

6 A Yes.

7 Q When?

8 A Around the middle of September, 2001.

9 Q Did Mr. Royer say what the topic was generally in one

10 word?

11 A Yes.

12 Q What?

13 A Terrorism.

14 THE COURT: Let me just interrupt here a second,

15 folks, lest there be any misunderstanding. This case has

16 nothing to do with terrorism. I want to make that point very

17 strongly to you. There are no such charges in this case or

18 any other and you will not hear any evidence that Mr. Elgindy

19 or anyone else was involved in or aided the events of

20 September 11th. Please understand this.

21 There was an investigation. Indeed, as I'm sure you

22 can appreciate, there were many investigations. One such

23 inquiry sought for a time to determine whether or not stock

24 trading records might provide some indication that individuals

25 had prior knowledge of the events of September 11th. All



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 806



1 right. But this case does not involve such allegations.

2 There are no charges. I couldn't repeat that more strongly to

3 you. In sharing this information with you I need to emphasize

4 to you that I make no comment about the credibility of this

5 witness or any witness or the significance or weight to attach

6 to this testimony should you credit it. Those are issues, as

7 you know, left exclusively to the jury, as I've already

8 instructed you. So, please don't be misled by this.

9 All right. Go ahead, Mr. Breen.

10 MR. BREEN: Thank you, Your Honor.

11 Q Did Mr. Royer say whether a file had been opened in this

12 regard?

13 A Yes.

14 Q That it had?

15 A That one had, yes.

16 Q Did you have one conversation with Mr. Royer about this

17 or a series of conversations?

18 A A series of conversations.

19 Q How many times total did you speak with Mr. Royer about

20 this investigation?

21 A Probably around 30 times.

22 Q How many times while Mr. Royer was still an FBI agent?

23 A Probably around 20 times.

24 Q Were you concerned that this investigation might impact

25 Mr. Royer's new job with Mr. Elgindy?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 807



1 A Yes.

2 Q The first time the issue was raised by Mr. Royer how were

3 you communicating?

4 A By telephone.

5 Q Without describing the details of what you were told,

6 describe how it first came up?

7 A Jeff had called me, we were just having a general

8 discussion about things that I don't really remember. I

9 noticed in the conversation with him that he was -- seemed

10 kind of depressed, kind of worried, kind of down and I asked

11 him what was bothering him and that's when he informed me

12 about the investigation.

13 Q Did Mr. Royer say anything during this conversation about

14 the impact it might have on his job?

15 A Yes.

16 Q Did he express concern?

17 A Yes.

18 Q Now, after this call while Mr. Royer was still an FBI

19 agent did Mr. Royer provide you with details regarding this

20 new investigation of Mr. Elgindy?

21 A Yes.

22 Q Did Mr. Royer say that an individual named Matt Tyson had

23 reported Mr. Elgindy?

24 A Yes.

25 Q Who is Matt Tyson?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 808



1 A Matt Tyson is a former business partner of Mr. Elgindy's

2 that Mr. Elgindy was in a huge dispute with him.

3 Q Did Mr. Royer say that an individual named John Liviakis

4 had also reported Mr. Elgindy?

5 A Yes.

6 Q Who was Mr. Liviakis?

7 A Mr. Liviakis was the promoter that was behind the company

8 buyout that we had shorted earlier that year.

9 Q Did Mr. Royer say that Mr. Elgindy's broker reported

10 Mr. Elgindy as well?

11 A Yes.

12 MR. BERKE: Objection.

13 THE COURT: Overruled.

14 Q Did Mr. Royer say whether the broker's report related to

15 Mr. Elgindy's trading?

16 A Yes.

17 Q Did Mr. Royer say whether the investigation involved

18 Mr. Elgindy's trading?

19 A Yes.

20 Q What did Mr. Royer say about Mr. Elgindy's trading

21 specifically?

22 A What Mr. Royer told me was the investigation involved, as

23 far as the trading part, that Mr. Elgindy had went into two

24 different brokerage firms the day before 9/11, Charles Schwab

25 was one of them and Smith Barney was the other; his kids trust



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 809



1 accounts were at these brokerage firms and that he had

2 liquidated -- tried to liquidate all the accounts and just

3 went straight cash in the accounts and he told me that from

4 what he was seeing that the total was around six million

5 dollars that he was trying to liquidate.

6 Q Did Mr. Royer say whether these were long or short

7 accounts?

8 A He didn't say either way.

9 Q Did you presume that they were one or the other?

10 A I thought that they were long accounts.

11 Q Did Mr. Royer say anything about a Middle Eastern

12 charity?

13 A Yes.

14 Q Did Mr. Royer say that Mr. Elgindy had given money to

15 such a charity?

16 A Yes.

17 Q Did Mr. Royer mention the name of the charity?

18 A Yes.

19 Q What was the name?

20 A I think the name of it was Mercy International.

21 Q Now, during this period of time when Mr. Royer initially

22 told you about this new investigation, did Mr. Royer say

23 whether or not he would monitor the investigation?

24 A Yes.

25 Q What did he say about it?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 810



1 A He said that he would keep an eye on it and that as new

2 things came up, he would let me know.

3 Q Did Mr. Royer do so --

4 A Yes.

5 Q -- during his remaining months as an FBI agent?

6 A Yes.

7 Q And after he left the FBI as well?

8 A Yes.

9 Q Did you tell other people about the investigation as

10 well?

11 A Yes.

12 Q Other people who were involved with the short selling

13 scheme that you've described in your testimony?

14 A Yes.

15 Q When?

16 A Immediately after I was finding out the information.

17 Q Now, you mentioned in your testimony before a probation

18 letter. Do you know who that letter was to?

19 A Who the letter was to?

20 Q Let me back up. You testified that Mr. Royer talked

21 about Mr. Elgindy wanting Mr. Royer to write a letter

22 regarding Mr. Elgindy's probation, correct?

23 A Correct.

24 Q Did Mr. Royer tell you who that letter would be addressed

25 to?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 811



1 A No, he did not.

2 Q Did Mr. Royer tell you what the purpose was of the

3 letter?

4 A Yes.

5 Q What did he say?

6 A The purpose of the letter was to -- was, again, to

7 recommend Tony for early release from his probation. He told

8 me that the letter was to state that, you know, Tony was a

9 good guy now and that he had helped the government out in many

10 ways.

11 Q Now, you said the letter was to state -- let me ask you

12 it this way: Did Mr. Royer say whether there were things that

13 Mr. Elgindy wanted included in the letter?

14 A Yes.

15 Q What did Mr. Royer say Mr. Elgindy wanted included?

16 A The two things I mentioned, that Mr. Elgindy was a good

17 guy and that he had aided the government in many

18 investigations.

19 Q Did Mr. Royer mention anything about Mr. Elgindy wanting

20 something included about Mr. Elgindy having changed his ways?

21 A Yes.

22 Q What did he say about that?

23 A That it was kind of along the lines of a good guy, that

24 Mr. Elgindy was a bad guy gone good, that he had changed his

25 ways and, you know, was living right and everything.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 812



1 Q Did Mr. Royer say whether he had agreed to write the

2 letter?

3 A Yes, he said that he had agreed.

4 Q Did Mr. Royer tell you why he wrote the letter?

5 A He told me he felt like he had to write the letter if he

6 were going to go to work for Tony, that he didn't really have

7 a choice.

8 Q How many times did you discuss this letter with

9 Mr. Royer?

10 A Approximately four times.

11 Q How many times while Mr. Royer was still an FBI agent?

12 A I think two times while he was an FBI agent.

13 Q Do you remember when the subject of the letter came up

14 the first time?

15 A Yes, back in the summer of 2001.

16 Q Now, focussing on the discussions after Mr. Royer left

17 the FBI, describe the conversations in that time frame

18 regarding the letter?

19 A The letter came up in a conversation between Jeff and I

20 after he had left the Bureau where he was talking about there

21 was some people complaining because the letter was not dated

22 and so people were wondering whether he had written this

23 letter in his official FBI capacity before December 25th or

24 had the letter been written after he left the Bureau since

25 there was no date, there was a lot of controversy about that.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 813



1 Q Did Mr. Royer tell you whether he had written it before

2 he left the Bureau or after?

3 A No, he didn't tell me.

4 Q He didn't say either way?

5 A He didn't say either way.

6 Q Now, again, going back in time, in September or October

7 after learning about the new investigation of Mr. Elgindy did

8 your trading related activities with Mr. Royer and Mr. Elgindy

9 stop or slow at all?

10 A No.

11 Q Did Mr. Royer provide you in this time frame with

12 additional law enforcement information regarding other

13 companies?

14 A Yes.

15 Q We'll come back to the new investigation but before we

16 do, I want to ask you some questions about some of the other

17 stocks.

18 A Okay.

19 Q Have you heard after company called Vital Living

20 Products?

21 A Yes.

22 Q How did you refer to it?

23 A VLPI.

24 Q Was VLPI an AP site stock?

25 A Yes.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 814



1 Q Do you remember how the site became interested in it?

2 A The stock was making some rapid upper moves, moves upward

3 and the site began to talk about the stock.

4 Q Was it a trading call on the site?

5 A Yes.

6 Q What does a trading call mean again?

7 A A trading call, it is an official call on the site that

8 either Mr. Elgindy or one of the guys in blue on the site

9 make.

10 Q Was it an off and on again -- was it a trading call that

11 went from short to cover, back to short?

12 A Yes.

13 Q And explain again what that means?

14 A Short, of course, means to sell the stock; cover, a cover

15 call is made when the stock falls to cover at a profit, you

16 buy and then the stock took off upward again and so another

17 short call was made on the stock to sell again.

18 Q Did you do any research regarding VLPI?

19 A Yes.

20 Q What did you do?

21 A Followed my normal procedures of pulling the financials

22 from the Edgar online site, getting whatever names together I

23 could get and other information about the company to give to

24 Mr. Royer so that he could do his normal checks for me.

25 Q Did you, in fact, give that information to Mr. Royer?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 815



1 A Yes.

2 Q What did you ask him to do?

3 A The gentleman behind the company that we were interested

4 in, his last name was Podrebarac, I had him do a background

5 check on Mr. Podrebarac, see if there was any past problems,

6 if there was any current investigations and if there is

7 anybody out there looking at VLPI, the company itself.

8 Q Did Mr. Royer provide you with information thereafter?

9 A Yes.

10 Q What did he tell you?

11 A He told me that Podrebarac had several past problems with

12 the SEC but he didn't see anything with the FBI.

13 Q What did you do with that information?

14 A I gave the information to Mr. Elgindy.

15 Q Did you give it to Mr. Elgindy close in time to when you

16 received it yourself?

17 A Yes.

18 Q Did Mr. Elgindy do an Inside Truth report on VLPI?

19 A Yes.

20 Q Remind us again what Inside Truth is?

21 A Inside Truth is the public web site that Mr. Elgindy

22 owned where reports were put out on different companies for

23 the public to view.

24 Q Was there anything from you or Mr. Royer in this report

25 that you know of?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 816



1 A Not that I know of, no.

2 Q Was there a time that you learned more information about

3 VLPI from Mr. Royer?

4 A Yes.

5 Q When approximately?

6 A Just a few days after we had started taking a hard look

7 at it Mr. Royer informed me that the SEC had opened an

8 investigation on VLPI that had to do with something about

9 their test not being a certified test.

10 Q What did you do with that information?

11 A I gave it to Mr. Elgindy.

12 Q What did you tell Mr. Elgindy?

13 A I told him specifically what Jeff had told me, that there

14 was an open SEC investigation into VLPI and that, again, it

15 had something to do with -- the test wasn't certified or some

16 official language.

17 Q In this same time period did you also receive FBI

18 information from Mr. Royer?

19 A Yes.

20 Q What did Mr. Royer tell you in that regard?

21 A He told me that the FBI was going to start looking into

22 VLPI informally to see if there was anything going on that

23 they should be aware of.

24 Q Did you provide this information to Mr. Elgindy as well?

25 A Yes.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 817



1 Q In the same conversation or a different conversation?

2 A I believe it was in the same conversation of me sharing

3 the SEC information with him.

4 Q What did Mr. Elgindy do with the information that you

5 provided?

6 A He gave it out to the web site.

7 Q All of it or some of it?

8 A I believe some of it.

9 Q I'm going to show you a chat log marked GX DC-226.

10 THE COURT: When you say the web site, you mean the

11 Anthony Pacific web site?

12 THE WITNESS: Yes, sir.

13 THE COURT: Chat log, I'm sorry?

14 MR. BREEN: It is 226, Your Honor.

15 Your Honor, may we make an adjustment to the screen

16 here?

17 THE COURT: Go ahead.

18 Q Mr. Cleveland, this is a chat log for November 28th,

19 2001. Would you please read the highlighted portion.

20 A Yes. At 13:30 Anthony states: VLPI SEC investigation,

21 test was never certified and/or approved by anyone.

22 Q Is that the information that you received from Mr. Royer?

23 A Yes.

24 Q Is that the information that you then communicated to

25 Mr. Elgindy?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 818



1 A Yes.

2 Q Please continue down the page.

3 A At 13:31 Anthony states: VLPI, SEC in Frisco is where we

4 sent all our stuff on this turd.

5 Q Is that information that you received from Mr. Royer?

6 A No.

7 MR. BERKE: Mr. Breen, which exhibit number are we

8 on?

9 MR. BREEN: 226.

10 Q What happened to VLPI thereafter?

11 A It fell pretty hard.

12 Q Was there a reason that it fell hard?

13 A Yes.

14 Q What was the reason?

15 A VLPI's headquarters had been raided by the FBI.

16 Q Is that information that became public?

17 A Yes.

18 Q And that was announced to the site?

19 A Yes.

20 Q I'm going to show you GX DC-228. Please read the

21 highlighted portions.

22 A Okay. It says: Bloomberg search by FBI agents, Federal

23 Bureau of Investigation's Charlotte office.

24 Q And Bloomberg is what?

25 A Bloomberg is a financial news, news wire type deal.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 819



1 Q And that's a broadcast of what's been put out publicly on

2 Bloomberg?

3 A Correct.

4 Q Did you continue thereafter to get information on VLPI

5 from Mr. Royer?

6 A Yes.

7 Q What did he tell you next?

8 A The next thing I remember him telling me was in a

9 conversation he told me that the AP site, our private site was

10 the ones who were responsible for the raids taking place and

11 also that Podrebarac was going to face criminal indictments

12 and was being looked at for fraud charges.

13 Q What did you do with that information?

14 A I gave it to Mr. Elgindy.

15 Q What did he do with it?

16 A He gave it to the site.

17 Q I'm going to show you GX DC-237, which is an AP site

18 broadcast dated December 15th, 2001. Please read the

19 highlighted portion.

20 A Okay. VLPI president and CEO faces criminal indictments

21 and fraud charges (most likely). Insidetruth.com is 100

22 percent responsible for this investigation and subsequent raid

23 confirmed by SEC office in San Francisco.

24 Q Now, again, the part about the criminal indictment and

25 fraud charge, that information that came from Mr. Royer?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 820



1 A Yes.

2 Q That he provided to you?

3 A Yes.

4 Q And you provided to Mr. Elgindy?

5 A Yes.

6 Q Did you trade in VLPI stock?

7 A Yes.

8 Q Was your trading based on law enforcement information?

9 A Yes.

10 Q On whose behalf did you trade?

11 A Jeff and I.

12 Q Do you know whether you made or lost money?

13 A I think we did all right on that one, I think we made a

14 little bit of money on it.

15 Q Now, you said before that Mr. Royer's last day at the FBI

16 was December 25th, 2001?

17 A Correct.

18 Q Were there some stocks that the site started before

19 Mr. Royer left the FBI and continued after?

20 A Yes.

21 Q Have you heard of a company called Eagle Building

22 Technologies?

23 A Yes.

24 Q How did you refer to it?

25 A EGBT.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 821



1 Q EGBT was the ticker symbol?

2 A Yes.

3 Q Was EGBT an AP site stock?

4 A Yes.

5 Q Was it initiated before or after Mr. Royer left the FBI?

6 A Before.

7 Q Did it continue thereafter?

8 A Yes.

9 Q Do you remember how it was that it was initiated?

10 A It is not real clear, either I found it on

11 overthecounterbulletin.com or Quack brought it to me. I'm

12 real unclear as far as who brought it to the site.

13 Q What is overthecounterbulletinboard.com?

14 A Overthecounterbulletinboard.com is a web site

15 specifically for bulletin board stocks that a person can go to

16 and look at the previous day's trading to see which stocks

17 were big movers, which stocks were big losers, things of that

18 nature.

19 Q Did you do any research on it?

20 A Yes.

21 Q What did you do?

22 A I went to the financials, as I normally did, put the

23 names together that I could find with other information to

24 give to Mr. Royer to do checks on it.

25 Q What did you ask Mr. Royer to do?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 822



1 A In this particular case I had him look at the company,

2 see if there was any SEC problems. The CEO of the company was

3 a gentleman by the name of Anthony D'Amato, I gave his name to

4 Jeff to see if there was anything, again, past problems or

5 current investigations on him.

6 Q Did Mr. Royer provide you with any information?

7 A Yes.

8 Q Thereafter?

9 A Yes.

10 Q What did he tell you?

11 A He told me that as far as Eagle Building Technologies

12 went, that there was an organized crime link to the company.

13 He also told me that Anthony D'Amato, the CEO, was the

14 grandson of Tony D'Amato who he said was the underboss in the

15 Genovese crime family.

16 Q Did Mr. Royer provide you with any documentation?

17 A Yes.

18 Q What did he provide you with?

19 A He provided me with a Government Choice Point document

20 which told a lot about the background of Mr. D'Amato.

21 Q What kind of a Choice Point?

22 A It was a Government Choice Point.

23 Q What is a Government Choice Point?

24 A A Government Choice Point is, again, it gives you

25 background information, all sorts of information on a person,



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 823



1 ,where they've lived, things like that. The government one,

2 as I think Jeff explained to me, is much more detailed than

3 what a normal Choice Point would be and it also gave you

4 information on a person that a normal Choice Point would not,

5 the fact that it was government, he got more out of it.

6 Q Just so we're clear, Choice Point is a company that

7 compiles information about individuals and companies?

8 A Yes.

9 Q And it provides reports?

10 A Correct.

11 Q And there's different levels of Choice Point that

12 depending on whether you're government or non-government?

13 A Correct.

14 Q This was a Government Choice Point?

15 A Correct.

16 Q What did the Government Choice Point look like?

17 A It had columns and boxes on it, stuff was kind of --

18 different things about Mr. D'Amato was blocked off. It showed

19 like in one box all the different ways that he had spelled his

20 name, different names that he used. Another box gave his

21 Social Security number, his date of birth. Other boxes showed

22 his current address as well as his previous address. And then

23 the current business that he was involved in as well as all

24 other businesses that he was involved in.

25 Q Did Mr. Royer explain how this document related to the



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 824



1 information he gave you regarding Mr. D'Amato?

2 A Well, he told me that when I questioned him as to, you

3 know, is this the correct D'Amato, he told me, you know, well,

4 it's got the same Social Security number and the same birth

5 date as the information that I had given him and so we knew

6 that we had the right guy.

7 Q Who was Mr. D'Amato as it related to the company EGBT?

8 A I think he was the CEO.

9 Q So, when you say you had the right guy, the CEO was the

10 same person that Mr. Royer mentioned with regard to the

11 organized crime information?

12 A Correct.

13 Q Did you get any information from Mr. Royer regarding any

14 other individuals relating to this company?

15 A Yes.

16 Q Who did you get information about?

17 A I got information on an investor in the company by the

18 name of Motasem Khashoggi. He caught my attention, his name

19 caught my attention because of the Khashoggi that we had went

20 up against in the Genesisintermedia short sell and so I had

21 Jeff check this guy out also.

22 Q You testified about Genesisintermedia on Thursday,

23 correct?

24 A Correct.

25 Q And the individual in connection with GENI was another



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 825



1 person by the name of Khashoggi?

2 A Yes.

3 Q What was that individual's first name?

4 A Adnan.

5 Q And this one was Motasem?

6 A Yes.

7 Q Did Mr. Royer tell you anything about Motasem Khashoggi?

8 A He told me that Motasem Khashoggi was kin to Adnan

9 Khashoggi, that he thought that Motasem was either his nephew

10 or a cousin, he wasn't for sure -- he knew that they were

11 definitely kin, he just wasn't for sure how.

12 Q What did you do with this information?

13 A I gave this information to Mr. Elgindy.

14 Q All of it?

15 A All of it.

16 Q The D'Amato information as well as the Khashoggi

17 information?

18 A Yes.

19 Q Did you give it to him right away or did you wait?

20 A I gave it to him pretty quickly after I got it.

21 Q Did you give it to anybody else at in the meantime?

22 A I shared this information with Kent Terrell, Quack from

23 the AP site, and also Niko from the AP site.

24 Q Did Mr. Elgindy release it to the site?

25 A Not immediately, no.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 826



1 Q Did he eventually release some of it?

2 A Yes.

3 Q In the meantime did there come a point in time when you

4 were put in touch with personnel at the SEC?

5 A Yes.

6 Q Who were you put in touch with?

7 A Rob Long.

8 Q How was this accomplished?

9 A I called Jeff and told him that eagle building had been

10 putting out some PRs that I thought were lies, that I wanted

11 to talk to somebody at the SEC about the press releases and he

12 told me that he would find out who it was that I needed to

13 talk to and get back with me. He got back with me about 30

14 minutes later and told me that I needed to call Rob Long with

15 the SEC in Washington.

16 Q Did you call Mr. Long?

17 A Yes.

18 Q Tell us about the conversation?

19 A I got him on the phone and told him what I wanted to talk

20 about. He asked me what information I had. I told him about

21 the press releases, I had told him about D'Amato, that he

22 wasn't such a good guy, and I also told him that Khashoggi,

23 Motasem Khashoggi was an investor in the company and I told

24 him, I said he's kin to the Adnan Khashoggi from Genesis and I

25 waited for a response from him and he just told me that he



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 827



1 could make no comment about any investigation.

2 Q Now, what did you tell him about Mr. D'Amato?

3 A I told him that Mr. D'Amato was connected to organized

4 crime, I told him that Mr. D'Amato was the grandson of Tony

5 D'Amato from the Genovese crime family, and I think I talked

6 to him a little bit about Mr. D'Amato's educational

7 background, that I thought it was false.

8 Q Now, you provided information to him, did he provide any

9 information back to you?

10 A No.

11 Q Did there come a time later when Mr. Elgindy made a short

12 sale recommendation on EGBT?

13 A Yes.

14 Q After you provided him the information that you received

15 from Mr. Royer?

16 A Yes.

17 Q I'm going to show you what's been marked GX DC-352. It

18 is a chart log for November 26, 2001. Is that the

19 recommendation?

20 A Yes.

21 Q Please read the highlighted portion out loud.

22 A 11:40 Anthony states: EGBT short 25 percent @ 11.80.

23 Q Now, when Mr. Elgindy released the information or some of

24 the information on EGBT, did it come out all at once or over

25 time?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 828



1 A Over time.

2 Q I'm going to show you a chat log that's marked GX DC-221

3 dated November 26, 2001.

4 Please read the highlighted portions.

5 A Okay. At 11:18 Anthony states: Why is EGBT up?

6 Quack replies: It's the total package AP.

7 Anthony says: I'm sorry, I don't get that kind of

8 talk.

9 Quack states: No need for any other companies.

10 Anthony says: I still don't get it, what they do.

11 Parnell states: They invent thingamabobs to fix

12 whatever you need.

13 Anthony says: They do. Sounds like a great long.

14 Thanks. Just picked up some in at 12.

15 Q What is happening there?

16 A Anthony is just asking why the stock is up. The guys are

17 replying to him, the total package comment from Quack, the

18 thingamabobs from Parnell, they're talking about the press

19 releases that EGBT had put out and then Tony says, sounds like

20 a great long, thanks, just pick some up, he's just joking

21 there

22 Q Then continuing on the next page.

23 A At 11:23 Anthony states: Any dirt on this whore? And

24 then he repeats the question

25 Quack states: Careful on EGBT, you could end up



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 829



1 with a lone wolf head in your bed.

2 Q Do you know what that is a reference to?

3 A I think he's making reference to the organized crime and

4 the Godfather where a head winds up -- a horse head winds up

5 in somebody's bed. I think that's what he's making reference

6 to there.

7 Q At that point had you communicated to Quack the organized

8 crime information that you had received from Mr. Royer?

9 A Yes.

10 Q Please continue.

11 A 11:30 Anthony asks: Question, is Khashoggi of EGBT

12 related to Adnan the GENI sucking loser?

13 Bond1 replies: Brother.

14 Tony says: His bro, I see.

15 Bond1 says: Or cousin, not same GENI guy.

16 Tony says: Definitely family I suppose. One

17 brother left here and then they are all gone.

18 Q Now, at this point had you already provided the

19 information regarding Mr. Khashoggi to Mr. Elgindy?

20 A Yes.

21 Q What is happening here?

22 A Right here what's going on is Mr. Elgindy is trying to

23 independently verify this information, you know, outside of it

24 being verified by Jeff we're trying to independently do it

25 here.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 830



1 Q Continuing on the next page.

2 A 11:40 Anthony states: EGBT short 25 percent at 11.80.

3 EGBT is a total scam. And he repeats it.

4 Q Again, the next page, please continue.

5 A 11:42 Anthony states: Very rarely do you have such a

6 scammy POS spewing such easily defrocked sewage. Anyone who

7 has never seen a scam before please look at EGBT. I will now

8 insert my foot into the cajoles of the CEO. Folks, EGBT is a

9 POS if I haven't mentioned it. This stock needs to be halted.

10 Who is pushing it. What promoters, brokers, firms, I want

11 freakin' names.

12 Quack says: Put your horse head proof sheets on AP.

13 Q Again, the horse head proof sheets, another reference to

14 the godfather?

15 A Yes.

16 Q Next GX DC-222, continuation of the same conversation.

17 A At 11:51 Anthony states: EGBT has a very long history of

18 scamming news and it all started immediately after Khashoggi

19 got involved. So it is important to link him to Khashoggi of

20 GENI. I can't have guesses, I need proof. Before Khashoggi

21 there was no news.

22 Quack states: This is Motasem Khashoggi.

23 Anthony replies: I know, who the hell is that,

24 related or not.

25 Q Again, what is happening here?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 831



1 A Again we're looking for independent verification outside

2 of Jeff.

3 Q Please continue.

4 A Anthony states: EGBT is a massive scam period. I just

5 need to know who the hell Motasem is and why is his name

6 spelled differently than Adnan.

7 Q Next I'm going to show you GX DC-223, again a

8 continuation of the same conversation. Please read the

9 highlighted portions.

10 A 12:21 Anthony states: EGBT is being run by a world class

11 con man. D'Amato is a creep and a criminal. Khashoggi is a

12 peanut in his underwear lining. Then he repeats that.

13 JP Trapper states: Tony, I missed something, how

14 does D'Amato fit in with Khashoggi.

15 Anthony says: Like a tongue and groove.

16 Q Now, during this time period did you receive additional

17 information from Mr. Royer regarding EGBT?

18 A Yes.

19 Q Do you remember what he told you?

20 A Yes.

21 Q What did he tell you?

22 A The next thing I remember Mr. Royer telling me about EGBT

23 was two things actually, that the FBI -- I'd been trying to

24 get him to have the FBI take a look at him and that the FBI

25 was going to again look at them informally and also that



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 832



1 Motasem Khashoggi had been nailed on a -- had gotten in

2 trouble on a fraud case involving Citibank, he had defrauded

3 Citibank out of like three million dollars or so.

4 Q What did you do with this information?

5 A I gave it to Mr. Elgindy.

6 Q What did he do with it?

7 A He published it to the site.

8 Q Next I'm going to show you GX DC-230. Would you please

9 read the highlighted portions.

10 A At 18:33 Anthony states: EGBT's Khashoggi scum bag.

11 EGBT has a scum bag Khashoggi. I love it. Cairo court nailed

12 him. It shows the scum and vermin that's involved. I plan on

13 killing him verbally. Motasem Khashoggi of defrauding

14 Citibank. I think it is safe to say that as of three minutes

15 ago a FBI investigation has opened on EGBT. I waste no time,

16 F the bastard. I don't know for a fact but I believe that I

17 have sufficient knowledge to say the FBI is on this now. I'm

18 feeling mighty good about now, I need to make a few mil so I

19 can go back on vacation.

20 Then he says woo hoo.

21 Q Now, in this time frame did you continue your

22 correspondence with the SEC?

23 A Yes.

24 Q Did you get any information from the SEC?

25 A No.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 833



1 Q Did Mr. Royer try to get information from the SEC?

2 A Yes.

3 Q Did Mr. Royer talk to you about what he was going to do

4 before he did it?

5 A Yes.

6 Q What did Mr. Royer say he was going to do in that regard?

7 A Mr. Royer told me that he was going to call Rob Long

8 himself and talk to Rob Long about Eagle Building and see if

9 he could get any information as to what the SEC may or may not

10 be doing in regards to Eagle Building.

11 Q Did you talk to Mr. Royer afterwards?

12 A Yes.

13 Q Did he tell you how his conversation went with Mr. Long?

14 A Yes.

15 Q What did Mr. Royer say?

16 A He told me that the conversation did not go well, he said

17 that Mr. Long was being a dick about it, that he would not

18 give him any information and Mr. Royer was upset about it.

19 Q Now, at this point in time had Mr. Elgindy released all

20 the information that you had told him regarding EGBT?

21 A No.

22 Q What information had not yet been released?

23 A The organized crime.

24 Q Did Mr. Elgindy flaunt the fact that he had information

25 he didn't release to the site?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 834



1 A Yes.

2 Q In the AP chat room?

3 A Yes.

4 Q I'm going to show you GX DC-265. Please read the

5 highlighted portions.

6 A At 12:06 Anthony states: I have some info on EGBT. The

7 info is that I still believe what I did earlier. It is

8 overvalued and can't accomplish what they claimed.

9 Kris asks: Any new info?

10 Anthony says: Yes, but I ain't sharing it yet.

11 I'll share it when EGBT is 5. Nothing I have learned makes me

12 feel concerned about my open call.

13 Q Please explain the comment about 5.

14 A What he's talking about is five, he's talking about EGBT

15 being at $5 a share.

16 Q Why is that significant in short selling?

17 A $5 a share is significant because that is when a stock

18 either becomes designated or non-designated. If a stock is

19 below $5 a share, it is what we refer to as a designated

20 stock. What this means is that brokerage firms cannot just

21 push this stock to the public, they can't recommend it to

22 their clients without first sending out a letter to be signed

23 by the client just saying that they have, you know, discussed

24 this with the broker and this is the stock they're going to

25 buy; in other words, it doesn't let the broker call somebody



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 835



1 on a stock that's trading below $5 and say, hey, you got to

2 buy it now so they can't create a buying frenzy in a stock

3 that's below $5. Once it gets above $5 it is non-designated,

4 then, you know, they can call and push it to anybody however

5 they want to.

6 Q Is a stock more or less vulnerable when it moves to 5 or

7 below?

8 MR. BERKE: Objection.

9 THE COURT: No, this is a general question, I'll let

10 the witness answer.

11 Go ahead.

12 A Below 5 it is less vulnerable.

13 Q And vulnerable meaning vulnerable to what?

14 A Vulnerable to immediate downward pressure, it's less

15 vulnerable to scaring the public into selling because it is a

16 lot harder for the brokerage firms to push it to the public

17 when it is below that price.

18 Q Now, I'm going to show you another chat log, it is

19 GX DC-268.

20 Did Mr. Elgindy continue to discuss in the AP chat

21 room that he had information on EGBT?

22 A Yes.

23 Q And once again, that information that hadn't yet been

24 released was what?

25 A The organized crime part of EGBT.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 836



1 Q Please read the highlighted portions.

2 A At 11:32 Anthony states: Did I mention I have info on

3 EGBT. If I did, ignore me. Can't tell, just want you to know

4 that I know some stuff.

5 Kris says: Why do you do that. Why are we here.

6 Anthony replies: You are here to find out if I know

7 stuff.

8 11:34 Anthony states: And then if I tell someone

9 may call the company and tell me that I know what they already

10 know.

11 Kris says: LOL, laugh out loud. EGBT selling on

12 that tidbit Tony.

13 Q What did you understand that last comment to mean?

14 A The fact that Tony was making comments in the AP chat

15 about he knows info on EGBT, some of the guys in the chat room

16 were shorting it in anticipation that Tony may come out and

17 say what the information is and Kris is kind of laughing about

18 it because the stock is falling a little bit from the

19 shorting.

20 Q Next I'm going to show you another chat log that is

21 marked GX DC-301 dated February 12th, 2002. Plead read the

22 highlighted portions.

23 A At 11:38 Anthony Pacific states: By the way, I have a

24 monster secret on EGBT that I will share with those who get me

25 the pics on details on MHUT's larval. I have a secret on EGBT



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 837



1 that no one knows.

2 Quack: Not even you know nor does ectopy. When

3 audio is up I will maybe give out secret. Actually no reason

4 to share.

5 Q Now, did you know what the secret was at the time?

6 A Yes.

7 Q What was the secret?

8 A The organized crime link to Eagle Building and to

9 Mr. D'Amato.

10 Q How did you know?

11 A How did I know that that was the secret?

12 Q That he was referring to here?

13 A By this time I think that I was in Mr. Elgindy's office

14 and knew what was going on.

15 Q What did you mean that you were in his office?

16 A I had moved out to San Diego.

17 Q With Mr. Royer?

18 A Yes.

19 Q During this time period was there discussion regarding

20 the EGBT secret?

21 A Yes.

22 Q What was the discussion in that regard?

23 A Again, we talked about the organized crime aspect of

24 EGBT. We discussed the SEC information that we had on EGBT

25 and we were talking about the Inside Truth report, doing an



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 838



1 Inside Truth report on EGBT and whether or not we should

2 include the organized crime information as well as some of the

3 SEC information that we had.

4 Q What was the debate with regard to including the

5 organized crime information in the Inside Truth report?

6 A The debate was that it was not public information, that,

7 you know, the information had come from Jeff and it wasn't

8 anything that was out there in the public so we didn't think

9 it would be a good idea to put it out into the public's eyes

10 because people would wonder where it came from.

11 Q Now, back again to the SEC, in this time frame were you

12 still trying to provide information to the SEC?

13 A Yes.

14 Q What did you do in that regard?

15 A I e-mailed Rob Long, the SEC agent. I e-mailed him all

16 the information that I had on EGBT.

17 Q How did you put the e-mail together?

18 A I put the e-mail together using some of my own research,

19 ,some of the things that had been put together for the Inside

20 Truth report. It was kind of a compilation of both.

21 Q Did you work with anybody in putting that e-mail

22 together?

23 A Yes.

24 Q Who did you work with?

25 A Mr. Elgindy.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 839



1 Q Would you look in front of you in one of the binders at

2 exhibit 2122.

3 A Sure.

4 Q What is that?

5 A This is the e-mail, the e-mail that I put together for

6 Mr. Long at the SEC and then another e-mail, Tony's response

7 after reviewing the e-mail.

8 Q So, just so we understand the sequence, you wrote the

9 e-mail?

10 A Yes.

11 Q You forwarded it to Mr. Elgindy?

12 A Yes.

13 Q And then you received his comment, his message in return?

14 A Yes.

15 Q Now, have you read this e-mail recently?

16 A Yes.

17 THE COURT: Well, did you send it to Mr. Elgindy

18 before you sent it off to the SEC?

19 THE WITNESS: Yes.

20 THE COURT: Okay. Go ahead.

21 Q Have you read this e-mail recently?

22 A Yes.

23 Q Does it contain some of the information that you received

24 from Mr. Royer?

25 A Yes, it does.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 840



1 Q Including the information regarding Mr. D'Amato?

2 A Yes.

3 Q And Mr. Khashoggi?

4 A Yes.

5 MR. BREEN: Your Honor, the government offers

6 Government Exhibit 2122.

7 THE COURT: Any objection?

8 MR. BERKE: No objection.

9 MR. GERZOG: No objection.

10 THE COURT: At some logical point we'll take a short

11 ten.

12 MR. BREEN: This is a good time.

13 THE COURT: A short ten minutes, folks, if you catch

14 my drift, because we had late start, no fault of yours. We'll

15 take a short ten.

16 THE CLERK: All rise.

17 (Jury leaves courtroom.)

18 THE COURT: All right, let's keep it to ten minutes

19 folks.

20 MR. BERKE: Judge, I do want to raise one issue if I

21 may, at side-bar if I may?

22 (Continued on next page.)

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HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 841



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HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 842



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HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 843



1 (The jury enters the courtroom.)

2 THE COURT: Please be seated.

3 Go ahead, Mr. Breen.

4 MR. BREEN: Thank you, your Honor.

5 BY MR. BREEN: (Cont'd)

6 Q Mr. Cleveland, before the break you were talking about

7 Government Exhibit 2122.

8 A Yes.

9 Q You described this as an e-mail that you prepared to send

10 to Mr. Long at the SEC?

11 A Yes.

12 Q That you first forwarded to Mr. Elgindy?

13 A Yes.

14 Q Before sending it to Mr. Long?

15 A Correct.

16 Q Once again the text of the e-mail includes information

17 that you provided to Mr. Elgindy which you received from

18 Mr. Royer?

19 A Yes.

20 Q Please read Mr. Elgindy's response to you after you

21 forwarded this e-mail to him.

22 A Okay. It says: It's fine go ahead and send it as AP.

23 Tell him you are compiling it for me.

24 Q What did you take this first line to mean?

25 A Well, that the e-mail was fine and to send it as AP, send


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 844



1 it coming from Anthony Pacific instead of from myself.

2 Q You didn't take that to be ASAP, as soon as possible, but

3 as AP?

4 A No, as AP.

5 Q Why as AP?

6 A Well, I was in the AP office at the time working on this

7 and the AP office would get credit for the e-mail as opposed

8 to me individually.

9 Q Did you in fact send it?

10 A Yes.

11 Q Now, meanwhile, did Mr. Elgindy make any announcements

12 regarding the InsideTruth report?

13 A Yes.

14 Q The one you mentioned in your testimony before?

15 A Yes.

16 Q And EGBT?

17 A Yes.

18 Q Would you look at Government Exhibit 3016?

19 A (Complying)

20 Q Do you see it?

21 A Yes.

22 Q What do you recognize it to be?

23 A That is the e-mail blast, basically the preannouncement

24 e-mail blast of the InsideTruth report coming out.

25 MR. BREEN: Your Honor, the government offers 3016.


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 845



1 THE COURT: Any objection?

2 MR. BERKE: I don't believe so, Judge. If I can

3 just have one moment?

4 THE COURT: Sure.

5 (Pause)

6 MR. BERKE: Judge, if I can just have one moment.

7 (Pause)

8 MR. BERKE: We have no objection.

9 THE COURT: 3016 in evidence. Thank you, sir.

10 (Government Exhibit 3016 in evidence.)

11 Q Once again, this is an e-mail blast?

12 A Yes.

13 Q What's the date of it?

14 A February 12th, 2002.

15 Q Please read it outloud.

16 A Welcome To InsideTruth.com. InsideTruth.com will be

17 releasing a report on Eagle Building Technologies (OTCBB:

18 EGBT) on March 4th, 2002 and will be available at

19 www.InsideTruth.com. This report will be released to members

20 of the AnthonyPacific.com site approximately 2 to 5 days prior

21 to its public release.

22 Q What is this?

23 A This is a preannouncement, prerelease is what we called

24 it.

25 Q What was the purpose of preannouncements?


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 846



1 A To allow people -- to inform the public and everybody out

2 there that a report was coming out on a specific company.

3 Q Did the AP site get notice of the preannouncements before

4 they went out?

5 A I think there was a couple of cases where they did, yes.

6 Q Now, was the purpose of a preannouncement discussed in

7 the AP chat room?

8 A Yes.

9 Q I'm going to show you GX DC-308.

10 Now, what you just looked at, 3016, the date and

11 time of that was February 12, 11:33 a.m.?

12 A Correct.

13 Q Was there an impact on the stock from the

14 preannouncement?

15 A Yes.

16 Q Was that something that was discussed on the site?

17 A Yes.

18 Q GX DC-308, it's two days later, February 14th, 2002.

19 Please read the highlighted portion.

20 A At 13:58 Anthony states: I see no reason to cover EGBT.

21 Q Moving the same day to another chat log, GX DC-309.

22 A 14:06 Anthony states: Wow on EGBT.

23 14:10 Anthony states: Do I need to actually write

24 the report now? This report coming stuff works better than

25 the report?


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 847



1 Q What is Mr. Elgindy talking about there?

2 A He is talking about the effect that the preannouncement

3 had on the stock, the negative effect that the preannouncement

4 had on the stock.

5 Q What was the effect?

6 A The prereport coming out put downward pressure on the

7 stock, the stock sold off, went down because of the report,

8 the preannouncement going out saying there was a report

9 coming.

10 Q When he says "the report coming stuff works better than

11 the report," is that describing the purpose of the report?

12 MR. BERKE: Objection.

13 Q In your view?

14 MR. BERKE: Objection.

15 THE COURT: I think I heard it but can you read it

16 back.

17 (The record was read.)

18 THE COURT: Overruled.

19 A Yes.

20 Q Please continue reading.

21 A 14:11 Anthony states: North I always have a report.

22 Have I ever said I was doin a report that I didn't aside from

23 Part 2's.

24 Q Did the preannouncement attract any attention on the

25 message boards regarding EGBT?


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 848



1 A Yes.

2 Q What attention did it attract?

3 A It attracted -- obviously it attracted the attention of

4 the Longs who were in the stock and it also attracted the

5 attention of other sites that were out there touting the stock

6 that were actually trying to move the stock higher.

7 Q There was a specific site that drew the attention?

8 A Yes.

9 Q What was that site called?

10 A I believe it was called LongandShortReports.

11 Q What kind of a site is that?

12 A It was a site that was -- a site that what I call touted

13 stocks, it put out reports about different securities telling

14 people based off of technical analysis, you should buy at

15 these levels or sell at these levels.

16 Q What does "technical analysis" mean?

17 A Technical analysis is where a person doesn't care about

18 the fundamentals of the company, doesn't -- you don't care

19 really about anything about the company, what you are looking

20 at is charts to determine where different support and

21 resistant levels are and based off of what these charts tell

22 you, people read them and say this is a good place to buy or

23 this is a good place to sell.

24 Q Now, did LongandShortReports say something about the

25 Elgindy site?


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 849



1 A Yes; I believe they did.

2 Q Did Mr. Elgindy respond?

3 A Yes.

4 Q Please look in front of you at Government Exhibit 3026.

5 What is that?

6 A This is an InsideTruth report that is a response to

7 LongandShortReports.

8 Q Issued by what, is it InsideTruth's response?

9 A Yes.

10 Q The government offers 3026.

11 THE COURT: Gentlemen?

12 MR. BERKE: No objection. Judge.

13 MR. GERZOG: No objection, Judge.

14 THE COURT: Thank you. It's received.

15 (Government Exhibit 3026 in evidence.)

16 Q Please read the heading.

17 A February 14th, 2002, InsideTruth.com initiates coverage

18 on the diarrhea smoothie slurping and maggot feces chomping

19 writers at www.LongandShortReports.com.

20 Q Sorry.

21 A Sorry about that.

22 Q Please read the first two sentences of the paragraph.

23 A InsideTruth does not front run and never has. Every

24 report has always disclosed that we have a position that is

25 consistent with our reports. Furthermore, if InsideTruth.com


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 850



1 were to actually buy stocks upon the release of our reports we

2 would be broke. Should I continue?

3 Q No, stop there.

4 Did you consider those first two sentences of that

5 paragraph to be true and accurate?

6 A No.

7 Q Why not?

8 A The part about InsideTruth does not front run and never

9 has, that's inaccurate because there were different occasions

10 where we did front run. And also it says: Furthermore if

11 InsideTruth.com were to actually buy stocks upon the release

12 of our report we would be broke, that's exactly what we were

13 doing, buying stock immediately after the report was released

14 because the report had such a negative impact on the stock

15 that the short positions we had taken prior to the report were

16 very profitable in a lot of cases so we were going in and

17 buying right after the report was released.

18 Q Now, that being the case, is it true there was some

19 disclosure of the InsideTruth reports in terms of short

20 positions sometimes?

21 A Yes.

22 Q Please read the paragraph at the bottom of that

23 InsideTruth.

24 A InsideTruth.com is a free investors portal that provides

25 unavailable and exclusive information to the public and to


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 851



1 regulators. The purpose of InsideTruth is to weed out

2 misinformation and help in maintaining a critical eye on our

3 financial markets embroiled in a sea of conflicted interests.

4 InsideTruth.com is wholly owned by Pacific Equity

5 Investigations an equity valuation research center. It may

6 and often does have positions that are consistent with its

7 reports. For more details and disclosures please visit us at

8 www.InsideTruth.com.

9 Q Now, taking that as a whole, do you consider that

10 accurate or misleading?

11 A Misleading.

12 MR. BERKE: Objection, Judge.

13 THE COURT: What's the objection?

14 MR. BERKE: Judge, there is no foundation. It's

15 incomplete. It's partial. There is a lot more information

16 there.

17 THE COURT: Thank you. The objection is overruled.

18 Was it accurate?

19 THE WITNESS: No.

20 THE COURT: Why not?

21 THE WITNESS: It says the purpose of InsideTruth is

22 to weed out misinformation and help in maintaining a critical

23 eye on the financial markets. The purpose of InsideTruth was

24 to do as much damage as we possibly could to a stock, to put

25 as much negative publicity and negative information about a


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 852



1 company to make our positions profitable.

2 Q Now, I'm going to show you another chat log, it's GX

3 DC-306. In this time frame, did the pressure continue on this

4 stock on this date, EGBT?

5 A Yes.

6 Q Please read the highlighted portions.

7 A 13:22 Anthony states: EGBT sell short 100 percent at 3.

8 EGBT dead meat.

9 Q I'm next showing you GX DC-307, continuation of the same

10 conversation.

11 A 13:39 Anthony states: EGBT company says it should be

12 halted. A complete success.

13 Q Once again what is a halt?

14 A A halt is when all trading ceases in a particular stock.

15 Q Do you remember whether there was a halt?

16 A Yes, there was a halt eventually on EGBT.

17 Q Do you remember whether the stock reopened upon trading

18 the next day?

19 A The next day after this?

20 Q Yes.

21 A No, it did not.

22 Q Were there any announcements at InsideTruth regarding

23 EGBT the next day?

24 A Yes, that a report was coming.

25 Q I show you what's been marked Government Exhibit DC-353,


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 853



1 the broadcast the next day. Please read it outloud.

2 A 11:52 Anthony sends broadcast, EGBT preliminary report

3 and then he gives the link to go to read the preliminary

4 report.

5 Q What is that?

6 A That is the preliminary report on EGBT and the link that

7 goes with it.

8 Q That's on the AP site?

9 A Yes.

10 Q Was there also an announcement with regard to

11 InsideTruth?

12 A Yes.

13 Q Would you look in front of you at Government Exhibit

14 3017. What is that?

15 A That is an e-mail blast saying that InsideTruth.com was

16 going to release a report early.

17 MR. BREEN: The government offers 3017.

18 THE COURT: Any objection?

19 MR. BERKE: No objection, Judge.

20 MR. GERZOG: No objection.

21 THE COURT: Received. Thank you.

22 (Government Exhibit 3017 in evidence.)

23 Q What's the day and time of that e-mail blast?

24 A It's February 15th, 2002 at 11:24 a.m.

25 Q Please read the substance of the message.


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 854



1 A Welcome to InsideTruth.com. InsideTruth.com releases

2 EGBT report early. For the report see www.InsideTruth.com.

3 Q Now, just referring back to 3016 for a moment, is that

4 the report that was supposed to be released on March 4th?

5 A Yes.

6 Q Now it's being released early?

7 A Yes.

8 Q On February 15th, 2002 at 11:24 a.m.?

9 A Yes.

10 Q Would you look at 3027. What is that?

11 A This is the InsideTruth report on Eagle Building

12 Technologies.

13 MR. BREEN: The government offers 3027.

14 THE COURT: Any objection to 3027?

15 MR. GERZOG: No, your Honor.

16 THE COURT: Received.

17 MR. BERKE: Your Honor, just the same objection

18 about offering the reports. Just the same objection that has

19 been offered to the reports on the grounds of incompleteness.

20 THE COURT: All right. Noted. Overruled. Go

21 ahead.

22 (Government Exhibit 3027 in evidence.)

23 Q Before I take this off the screen, 3017 says that the

24 EGBT report announcing it, February 15th, 2002 at 11:24 a.m.?

25 A Correct.


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 855



1 Q Now, just focusing on the upper left-hand corner, is

2 there a date there?

3 A February 15th.

4 Q Is that the same date as the e-mail?

5 A Yes.

6 Q Announcing the early release of the report?

7 A Yes.

8 Q What's the date of the report?

9 A February 14th, 2002.

10 Q The day before?

11 A The day before.

12 Q Is February 14th, 2002 an accurate date?

13 A No.

14 Q What is the correct date?

15 A February 15th, 2002.

16 Q Now, turning to the substance of the report, would you

17 please read the heading?

18 A Sure. Attention all business editors. InsideTruth.com

19 initiates Eagle Building Technologies Inc. (OTCBB: EGBT) with

20 an immediate sell/sell short recommendation at $4.

21 Q Then read the paragraph that begins with the location San

22 Diego.

23 A San Diego, California February 14th, 2002.

24 InsideTruth.com initiates coverage on Eagle Building

25 Technologies Inc. (OTCBB: EGBT) with a strong sell rating and


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 856



1 a price target of 17 cents in next 12 months.

2 Q Now, had you recently read the substance of this report?

3 A Yes.

4 Q Does it include information that you received from

5 Mr. Royer and provided to Mr. Elgindy?

6 A I believe it does, yes.

7 Q What information does it include?

8 A It includes information about Mr. Khashoggi. It talks

9 about his relationship with Adnan Khashoggi. It talks about

10 the Citibank fraud case that Mr. Royer shared with me, the

11 fraud case in Cairo Egypt. I think that's about it.

12 Q You testified before that there was some debate about

13 whether to include the D'Amato organized crime information?

14 A Correct.

15 Q What was the decision in that regard?

16 A Leave it out.

17 Q Why?

18 A Because it was not public information.

19 Q No independent verification for it?

20 A No independent verification, none.

21 Q The last paragraph describing Pacific Equity

22 Investigations, Is that similar to other paragraphs you have

23 testified about?

24 A Yes.

25 Q Where you testified that you think it's misleading?


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 857



1 A Yes.

2 Q For the reasons you talked about before?

3 A Correct.

4 Q Now, were there any other announcements on EGBT that day?

5 A Yes.

6 Q Do you remember what the next announcement was?

7 A I believe there was another report that came out on EGBT.

8 Q Do you remember how it was announced?

9 A If I recall, I think it went through an e-mail blast

10 similar to the other, like a preannouncement.

11 Q I'm going to show you what's been marked GX DC-310, it's

12 a broadcast from the AP site later the same day. Please read

13 the highlighted portion.

14 A EGBT Part 2 report February 15th, 2002. Attention all

15 business editors: InsideTruth.com reiterates EGBT Inc.

16 (OTCBB: EGBT) with a target of a cement block per 100 share

17 certificate. Note to editors: The following is an investment

18 opinion issued by InsideTruth.com San Diego, California,

19 February 15th, 2002. InsideTruth.com reiterates coverage on

20 EGBT Inc. (OTCBB: EGBT) with a strong sell rating and a

21 reduced price target of one cent in the next 12 months.

22 Background: Refer to our last report which documented the

23 long history of EGBT Inc. pump and dump operation.

24 Q And a reference to the last report means what?

25 A The report that came out earlier that day, Part 1.


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 858



1 Q Now, please look at Government Exhibit 3028. What is

2 that?

3 A That's Eagle Building InsideTruth report Part 2.

4 Q The one referenced in this e-mail blast?

5 A Yes.

6 MR. BREEN: The government offers 3028.

7 THE COURT: Any objection?

8 MR. GERZOG: No objection, your Honor.

9 MR. BERKE: No objection.

10 THE COURT: 3028 in evidence.

11 (Government Exhibit 3028 in evidence.)

12 Q Now, just looking at the upper left-hand corner again,

13 what's the date on this report?

14 A February 15th.

15 Q Is that also the date of the report?

16 A Yes, it is.

17 Q Please read the heading.

18 A Attention all business editors InsideTruth.com reiterates

19 Eagle Building Technologies Inc. (OTCBB: EGBT) with a target

20 of a cement block per 100 share certificate.

21 Q Then continue down and read the paragraph that begins

22 with San Diego.

23 A San Diego, California February 15th, 2002,

24 InsideTruth.com reiterates coverage on Eagle Building

25 Technologies Inc. with a strong sell rating and a reduced


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 859



1 price target of 2 cents in next 12 months.

2 Q Now read the background section.

3 A Background, refer to our last report which documented the

4 long history of Eagle Technologies pump and dump operation.

5 Yesterday the market witnessed a Valentine's Day massacre.

6 Here's the recap of the soap opera. The company's stock blew

7 up crashing to a 1.44 from 4.60 at the open, $8 last week and

8 $12 last month. The company issued PR begging the SEC to halt

9 its stock. They confessed they will have to restate

10 financials for last two years essentially the span of time

11 since Anthony D'Amato became CEO.

12 Q Please stop there.

13 Do you recall if that's accurate as to what happened

14 to the stock on the 14th of February?

15 A I think that is accurate, the stock did fall hard on the

16 14th.

17 Q And did not open in trading on the next day, on the 15th?

18 A Correct.

19 Q Please continue down and read the paragraph that's

20 entitled "the real InsideTruth."

21 A Folks the above is not just a coincidence. Stocks

22 blow-up for a reason. The overview of our last report was

23 subtitled many questions few answers. Here are the answers,

24 the real story and you won't read it in pump and dump reports.

25 Pump and dump reports and Raging Bull touts have made a big


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 860



1 deal about the Anthony D'Amato insider buys of Eagle common

2 stock over the last few months. Everyone figured with cash in

3 the bank and the CEO buying shares publicly disclosed in the

4 open market and a nice tight float this one's going to the

5 moon; right? To refresh your memory we did report the

6 following yesterday.

7 Q Now, before we go to the next page, is that true, that

8 there was a report of the information on InsideTruth

9 yesterday?

10 A No.

11 Q What is the real truth?

12 A That the report had come out earlier, earlier the day,

13 the 15th, not yesterday, it was today that that report came

14 out.

15 Q After the halt?

16 A Yes.

17 Q After the drop in price?

18 A Yes.

19 Q On the second page, please read what it is that this

20 report claims was announced the day before?

21 A Starting at the top?

22 Q Yes.

23 A No mention was ever made in Eagle's filings about the

24 Khashoggi investment. Too bad that Reuter's reported that

25 Matosem Khashoggi was convicted and sentenced to prison for


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 861



1 bank fraud in Egypt in April 2001 for withdrawing over $3

2 million from a Citibank branch against a $20 million check he

3 deposited that bounced. Caliber and reputation. Hmmm.

4 Another well-known member of the Khashoggi family

5 Adnan Khashoggi figured prominently in the collapse of

6 Genesisintermedia which collapsed within days following the

7 9/11 disaster amidst SEC and FBI investigations and has not

8 traded since. More about this family connection later.

9 Q What was the source of that information in your view?

10 A Mr. Royer.

11 Q The information Mr. Royer provided you that you provided

12 Mr. Elgindy?

13 A Yes.

14 Q Now, focusing on the date of the first report, February

15 14th, 2002, Exhibit 3027, was there any benefit from

16 backdating this report from February 15th to February 14th?

17 A Sure, yes.

18 Q What was the benefit?

19 A It made us look like we were much, much better than what

20 we were. I mean, you know, people look at this report and say

21 wow, these guys put out this negative report and the very next

22 day the stock gets halted, you know, almost genius which

23 wasn't the case. The report went out after the stock had been

24 halted.

25 Q Did you trade in EGBT?


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 862



1 A I believe I did a little, yes.

2 Q Did you trade a lot in it?

3 A No.

4 Q Why not?

5 A When the stock finally started making a fall, it just

6 continued down. And again, I thought that the play was

7 already over with. After it had fallen like 50 percent, I was

8 a little bit scared about getting back into it because I was

9 scared I would get caught in a short squeeze and it would rise

10 rapidly against me and I would be in trouble on it as far as

11 losing money.

12 Q Now, after these reports on EGBT, did the dispute with

13 the LongandShortReports continue?

14 A Yes.

15 Q Did Mr. Elgindy continue to respond to things they said?

16 A Yes.

17 Q Look at Government's Exhibit 3018 please.

18 A 3018?

19 Q 3018.

20 What is that?

21 A This is an e-mail blast that -- it's an InsideTruth

22 e-mail blast in response to LongandShortReports.

23 MR. BREEN: The government offers 3018.

24 MR. BERKE: No objection.

25 MR. GERZOG: No objection.


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 863



1 THE COURT: 3018 in evidence.

2 (Government Exhibit 3018 in evidence.)

3 Q When did it go out?

4 A February 25th at -- in 2002.

5 Q February what?

6 A February 25th.

7 Q Are you looking at 3018?

8 A I have 3018-A. Sorry. February 15th, 2002.

9 Q Announcing another response to the LongandShortReports?

10 A Yes.

11 Q Please look at 3031. Is that the response that was

12 referred to in the e-mail blast you just read?

13 A Yes.

14 MR. BREEN: The government offers 3031.

15 MR. GERZOG: No objection.

16 THE COURT: Received.

17 (Government Exhibit 3031 in evidence.)

18 Q What is this?

19 A This is a response to the LongandShortReports. It's an

20 open letter to the subscribers.

21 Q To the subscribers of the LongandShortReports?

22 A Yes.

23 Q I want you to focus on the fourth paragraph up from the

24 bottom. Read that outloud.

25 Once again this is Mr. Elgindy on behalf of


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 864



1 InsideTruth writing to the LongandShortReports' subscribers.

2 A Okay. The paragraph starting off "it should"?

3 Q Yes.

4 A It should occur to L and S subscribers that stock

5 fraudsters need volume and more volume. Why? They need it to

6 dump their worthless shares. Trading recommendations from

7 sites like this are not benign even if they purport to go both

8 long and short. When you buy into this kind of source for

9 your investments you are generating volume that the fraudsters

10 use to dump their insider shares.

11 Q What is Mr. Elgindy talking about here?

12 A What he is talking about is a pump and dump scheme that

13 this site -- he is referring that they are involved with stock

14 fraudsters helping them pump up the volume of the stock

15 helping to increase the price of the stock so that the stock

16 is put into the public's hands and then after the insiders are

17 finished selling, the promotors finish selling, the public is

18 left with it and that's the job of the site is what he is

19 stating here.

20 Q Do the same concepts apply to a short sale as they would

21 apply to a long sale as described here?

22 MR. BERKE: Objection.

23 THE COURT: I don't understand the question.

24 Q In the context of the paragraph that you just read, it is

25 people who stand to benefit by doing what?


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 865



1 A Committing fraud.

2 Q How?

3 A In this case promoting the buying of stock so that the

4 promotors and insiders can sell their stock.

5 Q Now, the concept that's described there, does that have

6 equal applicability to somebody who wants to benefit from the

7 selling of stock?

8 MR. BERKE: Objection.

9 Judge, we may approach on this issue?

10 THE COURT: Come on over. I'm a little confused

11 myself.

12 (Continued on the next page.)

13

14

15

16

17

18

19

20

21

22

23

24

25


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Side Bar 866



1 (Side bar.)

2 THE COURT: I'm not following it. I'm confused.

3 When I'm confused and I hear objections...

4 MR. BREEN: Your Honor, what Mr. Elgindy describes

5 here is exactly the same thing but the flip side of it, of

6 what Mr. Elgindy was doing with his own site. So I'm probing

7 whether the analysis that Mr. Elgindy applied to another site

8 applies equally to what he was doing, one on the long side and

9 one on the short side.

10 THE COURT: The longs want to get the price up? The

11 shorts want to get the price eventually down? I'm not trying

12 to be cute but I don't follow the point.

13 MR. BREEN: The longs are in -- the longs are

14 encouraging investors to buy so that they can sell.

15 THE COURT: You mean the pump and dumpers?

16 MR. BREEN: Right. Just the same way that

17 Mr. Elgindy is including people to sell so we can buy to cover

18 his short sale.

19 THE COURT: I don't think at this point in the trial

20 after almost a week plus that we need him -- we need that

21 question or that answer. We have had it how many number of

22 times? It's pretty straightforward, even I understand that.

23 MR. BERKE: Judge, more generally, I would object to

24 try to elicit from this witness, as we may have more of that,

25 something is a fraud or isn't a fraud. The statement here


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Side Bar 867



1 relates to clearly Mr. Elgindy's belief that companies are

2 scams so when someone is trying to say sell, that's untrue,

3 it's a fraud. When someone is trying to sell or buy that's a

4 fraud because it's not true. Whereas when he and others on

5 the site are saying sell, it's not true because they really do

6 believe it's a scam or fraud.

7 THE COURT: I only wish you could sum up today. Boy

8 do I wish you could sum up today. I note your point.

9 MR. BERKE: That's what I'm objecting to doing

10 through the witness. Mr. Breen will have his chance.

11 THE COURT: I think we have established this through

12 the witness. Let's move on.

13 MR. BERKE: Can I make a related request? Can I ask

14 our last side bar conference be under seal.

15 THE COURT: What was it about?

16 MR. BERKE: It was related to the testimony on the

17 sensitive evidence.

18 THE COURT: Yeah.

19 MR. BERKE: Thank you Judge.

20 (Side bar concluded.)

21 (Continued on the next page.)

22

23

24

25


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 868



1 (In open court.)

2 BY MR. BREEN: (Cont'd)

3 Q Would you look at Government's Exhibit 3029 please. What

4 is that?

5 A This is a response to -- another response to

6 LongandShortReports.com.

7 MR. BREEN: Your Honor, the government offers 3029.

8 THE COURT: 3029. Any objection?

9 MR. BERKE: Judge, if I can just have one moment.

10 (Pause)

11 MR. BERKE: No objection.

12 THE COURT: 3029 in evidence.

13 Q It's another response to the same ongoing discussions of

14 the LongandShortReports?

15 A Yes.

16 Q By InsideTruth?

17 A Yes.

18 Q Now, focusing on the fifth paragraph, please read the

19 portion of the paragraph that begins with "we do know."

20 A We do know however that we traded 100 percent

21 consistently with our words and our alerts. We are currently

22 short EGBT in size and have been short in EGBT since November

23 above 10 to 11 dollars a share.

24 Q Do you consider those to be accurate and truthful

25 statements?


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 869



1 MR. BERKE: Objection.

2 THE COURT: Overruled.

3 A No, I do not.

4 Q Why not?

5 A Because we do not trade 100 percent consistently with our

6 words and our alerts. As far as we are currently short EGBT

7 in size, I'm not sure. I wasn't but I'm not sure about other

8 people. And have been short EGBT since November about 10 to

9 11 dollars a share, again, I'm not sure about other people's

10 trading, what they were doing.

11 Q Now, in this time frame, did InsideTruth publish a status

12 report?

13 A Yes.

14 Q What was the status report?

15 A The status report was kind of a report card of how

16 InsideTruth was doing on its stocks, its recommendations,

17 giving percentages gained or percentages lost for each

18 security that we traded.

19 Q Would you look at Government's Exhibit 3030 please.

20 A Yes.

21 Q What is that?

22 A This is the status review of InsideTruth reports.

23 MR. BREEN: Your Honor, the government offers

24 government Exhibit 3030.

25 MR. BERKE: No objection, your Honor.


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 870



1 THE COURT: 3030 in evidence.

2 (Government Exhibit 3030 in evidence.)

3 Q Now, you said this is a report that offers somewhat of a

4 report card on the InsideTruth report?

5 A Yes.

6 Q Showing the success rates?

7 A Yes.

8 Q In your testimony previously you have talked about

9 prereports that had false dates or times, EGBT, BIOP and GENI.

10 Have you looked at this to see whether the false dates and

11 times are included in the status review?

12 MR. BERKE: I object.

13 THE COURT: Overruled.

14 A Yes.

15 Q Yes, they are?

16 A Yes.

17 Q We are going to look at those. What impact did that

18 generally have on this report?

19 MR. BERKE: Objection, Judge.

20 THE COURT: What impact did it have on the report?

21 Q Did it improve the results or not?

22 THE COURT: Sustained.

23 Q Let's look at page 2 with the headings carryover from

24 page 1 which are issue, report date, price, when report

25 issued, recent price, percentage change. BIOP, is that one of


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 871



1 the three that you have referred to with regard to being a

2 false date?

3 A Yes.

4 Q Having looked at that, if the real date had been included

5 here as the report date, rather than the date that was used,

6 would the percentage change have been the same as what it is

7 in this column here?

8 MR. BERKE: Objection.

9 THE COURT: Overruled.

10 A No, it would not have.

11 Q Would it have been more or less?

12 A Less.

13 Q Focusing on EGBT, the bottom of the page there, is this

14 the report date that you testified about before that should

15 have been February 15th, 2002?

16 A Yes.

17 Q And the price listed for halt at 1.44, a dollar

18 forty-four?

19 A Yes.

20 Q Now, if this date here was accurate and the price when

21 report issued was accurate, do you know what the percentage

22 change would have been?

23 A Yes.

24 Q What?

25 A Zero.


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 872



1 Q Not negative 69 percent?

2 A Correct.

3 Q You testified about a stock called GENI on Friday,

4 Genesisintermedia?

5 A Yes.

6 Q About the time being false?

7 A Yes.

8 Q If the correct time was used to record the price when

9 report was issued, would the price have been $6.50?

10 A No, it would not have.

11 Q Would it have been more or less than that?

12 A Less than that.

13 Q Would the percentage increase have been negative 98

14 percent?

15 A No, it would have been a smaller number.

16 Q Now, was there anything else about this report that you

17 noticed in reviewing it?

18 A Yes.

19 Q What?

20 A Well, on some of the securities, the one that caught my

21 eye was INVN, Invision Corporation, dated 9/26/01. The short

22 says here the initial price was $9.50. The current price was

23 37.70 so it actually went up, it says 131 percent which 9.50

24 to 37.70, first of all, is closer to a 300 percent loss than a

25 131 percent loss because if it's a plus and speaking about a


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 873



1 short seller, you want it to be negative. He says we stopped

2 out of the stock at -- in the 22s, that's where he is coming

3 up with this 131 percent. But on the other side he has stocks

4 that we shorted that he is showing a current price of, you

5 know, .01 cents or something like that when in fact he

6 actually called a cover on the stock up 50 cents or a dollar,

7 a much higher price. But he is not including the price that

8 he called the cover, he is including where the security is

9 currently trading and so in my view, you know, it's not --

10 it's false, it's not right.

11 Q Just so we are clear, is what you are saying that there

12 was a different methodology used for this particular stock,

13 INVN?

14 A Yes.

15 MR. BERKE: I would object to the summary question.

16 THE COURT: I think that's just what the witness

17 said a moment ago. Sustained.

18 Let's move along.

19 MR. BREEN: Your Honor, I'm about to start a new

20 stock.

21 THE COURT: So? No. All right. We will break here

22 and pick it up at 2:05. Folks, don't discuss the case. Enjoy

23 your lunch. 2:05.

24 THE CLERK: All rise.

25 (The jury leaves the courtroom.)


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



874



1 THE COURT: Please step down.

2 (The witness leaves the stand.)

3 THE COURT: For what it's worth, I know you are

4 presumably approaching the tail end of this direct examination

5 but in terms of the bones, in terms of the basic structure

6 that you have established here, you have pretty well gone over

7 it and over it and over it and we are at the saturation point.

8 So let's hopefully maybe pick up the pace a little bit.

9 These particular refinements that you just went

10 through here, I understand the need for them and so forth.

11 Let's do what we can to move it along.

12 MR. BREEN: These were specific false statements we

13 were going to argue so it was important for us to go through

14 the particulars of it. The other stocks we plan to present we

15 plan to present quickly with the exception of Nuclear

16 Solutions, an extortion stock, where the presentation is a

17 little more involved.

18 THE COURT: So do you expect to finish this

19 afternoon?

20 MR. BREEN: I think I'm going to come pretty close

21 to finishing this afternoon.

22 THE COURT: All right. We will get a break and see

23 you at 2:05.

24 (A luncheon recess was taken.)

25 (Continued on the next page.)


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



875



1 A F T E R N O O N S E S S I O N

2 (The following takes place out of the presence of

3 the jury.)

4 THE COURT: Okay. What is on your mind?

5 MR. BREEN: Your Honor, one of the issues that could

6 come up if I get to that point today is the issue of

7 Mr. Royer's attempt to try to sell information to Dateline

8 with regard to files that he had taken with him after he left

9 the FBI. I believe that this is an issue that we haven't

10 received a ruling on yet. It is an issue that has been

11 briefed.

12 THE COURT: Oh, yeah, I'm fully familiar with it.

13 What do you expect Mr. Cleveland to be able to say?

14 MR. BREEN: Mr. Cleveland had a conversation with

15 Mr. Royer talking to Mr. Royer before Mr. Royer left to go to

16 Dateline where there was detailed discussion about the demand

17 that Mr. Royer was going to make for $600,000, that he was

18 going to provide the information related to this terrorism

19 investigation that Mr. Royer had worked on while he was with

20 the FBI.

21 Mr. Cleveland spoke with Mr. Royer the morning

22 Mr. Royer left at which time Mr. Royer said that he'd be back

23 quickly if they didn't pay the money but would be there longer

24 to provide them additional information if they Did. When

25 Mr. Royer returned the same day he had advised Mr. Cleveland



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



876



1 that Dateline does not pay for information and that he

2 provided it to them in any event.

3 MR. GERZOG: Your Honor, the problem is they're

4 offering this under 404(b) and it doesn't go to show any of

5 the things that 404(b) allows you to introduce evidence for.

6 Moreover, as I said in my opening, the only issue essentially

7 that we're contesting here is whether Mr. Royer traded on the

8 information that he gave Derrick Cleveland and/or Tony

9 Elgindy, whether he received money for it or whether he

10 himself traded on it and whether or not -- and we assert that

11 is not the truth; whether or not he went to Dateline with

12 information that had nothing to do with Mr. Elgindy, nothing

13 to do with stock market, nothing to do with anything else.

14 All they want to show is here's a guy who is so corrupt that

15 he will sell whatever he can to whoever he can and that to me

16 is not -- does not support any of the 404(b) bases for

17 introducing evidence.

18 THE COURT: I didn't recall it to be a 404(b) issue

19 but I'll discuss it on 404(b) terms because, as I understand

20 it, what's at stake here, the principal issue here is, of

21 course, as we stated many, many weeks ago, is what was going

22 on, what was the intent of the parties here. Was Mr. Royer

23 just a misguided agent frustrated with the shackles of the

24 bureaucracy, looking to maybe bend or even break the rules in

25 an effort to advance his investigations, or was he something



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



877



1 else.

2 Frankly, I don't know that it matters whether or not

3 he was paid for the information, I don't know that it matters

4 whether he traded on the information. The question is did he

5 give the information with a criminal intent, with an intent to

6 step outside his responsibility as an FBI agent. I'm

7 beginning to get the picture, frankly, of Mr. Royer who at the

8 time, say what you want about him, was severely financially

9 under pressure, or did he do it with some other intent in

10 mind; so, if you want to speak to it in the context of a

11 404(b) analysis, I think it goes squarely to the one issue

12 that is on trial here. I also believe it to be part of the,

13 if not the rest of the charged racketeering conspiracy,

14 certainly part and parcel to the issue of intent which the

15 government has to prove.

16 MR. GERZOG: It had nothing to do, respectfully,

17 with the racketeering conspiracy. Mr. Cleveland wasn't to

18 get any of the proceeds. He happened to tell Mr. Cleveland

19 allegedly because they were roommates.

20 THE COURT: But as part of this racketeering

21 conspiracy, if I misspoke forgive me, the government has to

22 prove that the actions were with criminal intent and it

23 strikes me that a willingness to trade confidential law

24 enforcement information, if indeed that's what it was, for a

25 price says a lot about whether or not Mr. Royer was embarked



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



878



1 upon a somewhat misguided and overzealous law enforcement

2 endeavor or was involved in something criminal.

3 MR. GERZOG: I respectfully disagree.

4 THE COURT: May I speak to counsel at the side-bar

5 on a very small matter.

6 (Continued on next page.)

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HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



879



1 (The following takes place at side-bar.)

2 THE COURT: In this day and age I have to get into

3 this at almost every trial and I am not pointing any fingers

4 at anyone but given the physical confines of our courthouse

5 facility, I would just simply ask that you instruct your

6 clients not to hang out in the entryway of the courthouse.

7 Move in, move out. I just want to avoid misunderstandings and

8 I guess it is Dr. Elgindy, if that's her last name, I don't

9 know, but the defendant's mother was planted -- again, I'm not

10 being sarcastic about this, she obviously was engrossed in

11 something she was reading, but dead square at center right

12 outside on the sidewalk directly in front of the entrance.

13 I don't for a moment begin to think she was there

14 for any sinister purpose but to avoid any misunderstandings,

15 instruct these people move in, out and away from the entryway.

16 MR. BERKE: Sure, Judge.

17 (End of side-bar.)

18

19

20 THE COURT: So, to Mr. Gerzog, to sum it up, we

21 note, of course, your objection for the record.

22 Mr. Breen, what is our pace, just generally

23 speaking?

24 MR. BREEN: I think, generally speaking, I'm going

25 to almost finish this afternoon.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



880



1 THE COURT: I'm not talking about with this chap,

2 I'm talking about the trial, how are we doing.

3 MR. BREEN: I think we're looking about on pace.

4 THE COURT: At pace?

5 MR. BREEN: Yes.

6 THE COURT: At the end of the second week I like to

7 give the jury some idea as to how we're doing.

8 MR. ISAACSON: Your Honor, if I could just ask if

9 the government's figure includes the defense case as well? I

10 assumed it did.

11 THE COURT: We'll take it up at the end of the day.)

12 THE CLERK: All rise.

13 (Jury enters courtroom.)

14 THE COURT: Please be seated, everyone. I meant to

15 mention to you this morning, it is my practice as we get into

16 the trial from time to time to give you reports on how we're

17 doing. We're a little early now, before this week is out I'm

18 going to give you a report in terms of what pace we're

19 maintaining. You may think because this one witness has been

20 on the stand for as long as he's been on the stand, my

21 goodness, we'll be here until the ice age returns. They're

22 not all going to be this long, I assure you.

23 I will give you a report right now; the very

24 preliminary indicators are we're doing okay.

25 Mr. Breen, please continue.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 881



1 MR. BREEN: Thank you, Your Honor.

2 D E R R I C K C L E V E L A N D, having been

3 previously duly sworn was examined and testified as follows:

4 DIRECT EXAMINATION (CONT'D.)

5 BY MR. BREEN:

6 Q Good afternoon, Mr. Cleveland.

7 A Good afternoon.

8 Q Have you heard of a company called Nuclear Solutions?

9 A Yes.

10 Q Was Nuclear Solutions an AP site stock?

11 A Yes.

12 Q How did you refer to it?

13 A NSOL.

14 Q Was that the ticker symbol?

15 A Yes.

16 Q Do you remember how it was that NSOL was initiated on the

17 AP site?

18 A I just remember people on the site, different people

19 talking about the stock and that's when it caught my

20 attention.

21 Q Once it caught your attention what did you do?

22 A I went through my normal procedure of pulling up

23 financials, looking at the names and other information about

24 the company to give to Mr. Royer so that he could check it

25 out.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 882



1 Q Did you provide the information to Mr. Royer?

2 A Yes.

3 Q Did you ask him to look for you?

4 A Yes.

5 Q Did he provide you with information later?

6 A Yes.

7 Q What did he tell you?

8 A The CEO of the company was a gentleman by the name of

9 Dr. Paul Brown. Jeff did a background check on him and came

10 back and told me that Dr. Brown had a felony conviction.

11 Q Did you take any notes of this conversation?

12 A Yes.

13 Q Did you take the notes while you were being provided with

14 the information?

15 A Yes, I did.

16 Q Would you look at Government's Exhibit 1205 A.

17 (Pause.)

18 Q Turn to page 64 please.

19 Are there notes there?

20 A Yes.

21 Q Whose notes are there?

22 A These are my notes.

23 Q Are these the notes you took during your discussion with

24 Mr. Royer regarding Mr. Brown?

25 A Yes.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 883



1 MR. BREEN: Your Honor, the government offers

2 Exhibit 1205 A.

3 THE COURT: All right, this is the exhibit offered

4 earlier in the trial?

5 MR. BREEN: We've offered it earlier, we've

6 established initial foundation.

7 THE COURT: All right. 1205 A, gentlemen?

8 MR. BERKE: No objection, Your Honor.

9 MR. GERZOG: No objection.

10 THE COURT: Received, thank you.

11 MR. BREEN: Thank you.

12 MR. BERKE: Could we get a page number?

13 THE COURT: 62 I believe.

14 MR. BREEN: 64.

15 THE COURT: I beg your pardon.

16 MR. BERKE: Thank you.

17 Q Now, if you just look at page 64, you can look on the

18 screen, and just read down the information that was provided

19 to you by Mr. Royer as you testified about before.

20 A Okay. It says Paul Brown, 43, Paul Maurice Brown,

21 8-16-58, 549-19-2063?

22 Q Stop there. What are those last two numbers?

23 A The first number that I read -- well, the 43 is his age,

24 the 8-16-58 is his birth date. The 549-19-2063 is his Social

25 Security number.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 884



1 Q Okay. Thank you.

2 Please continue reading.

3 A Arrested 1991 Idaho CDS-three years probation, 1976 petty

4 theft Sacramento, 1977 theft vehicle, 1977 concealed weapon,

5 1980 firearm concealed, 1980 fictitious, 1980 NSF.

6 Q Does this accurately describe the information as provided

7 to you by Mr. Royer?

8 A Yes.

9 Q Beyond this information was there some discussion?

10 A Yes.

11 Q Describe the discussion?

12 A When Mr. Royer was telling me that, in the same

13 conversation that he told me that Paul Brown was a convicted

14 felon he was real unsure, he made the comment, well, I think

15 he's a convicted felon and made the comment that he was

16 looking at something that he hadn't seen before, very

17 confused -- he was very confused as to what he was looking at

18 and, finally, by the end of the conversation he had determined

19 that Paul Brown was a convicted felon.

20 Q Now, once you had this information, what did you do with

21 it?

22 A I gave it to Mr. Elgindy.

23 Q What did Mr. Elgindy do with it?

24 A Mr. Elgindy put it out to the site.

25 Q I'm going to GX DC-356. It is a chat log for



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 885



1 December 19, 2001. Please read the underlined portions out

2 loud.

3 A Okay. At 13:30 Anthony Pacific states: NSOL CEO

4 Dr. Paul Maurice Brown is a convicted felon. Convicted of

5 possession of a controlled substance and on probation till

6 1997. Confirmed by the Corrections Department of Idaho prior

7 conv.

8 At 13:39 Anthony Pacific states: Guys like the CEO

9 of NSOL are scum, a three time felon.

10 Q Now, how many convictions did you tell Mr. Elgindy about?

11 A I think just one, the one conviction.

12 Q Do you know what the basis was for calling him a three

13 time felon?

14 A No, I do not.

15 Q What is the reference to the Corrections Department of

16 Idaho?

17 A Tony had called the Corrections Department in Idaho and

18 asked if Dr. Brown was on probation or had been on probation,

19 if he had a felony conviction and they had confirmed it for

20 him.

21 Q Was this independent verification?

22 A Yes.

23 MR. BERKE: Objection.

24 THE COURT: Overruled.

25 Q Would you have found this information without Mr. Royer?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 886



1 A No, we would not.

2 Q Why not?

3 A Nobody was looking for it.

4 Q Was it important to get independent verification?

5 A Yes.

6 Q Why?

7 A So that the information could be exposed, so it could be

8 thrown out to the public to see and if we had verified it

9 independently, you know, of course, then we wouldn't have to

10 use, you know, Mr. Royer's name that we got this information

11 from an FBI agent, we could say that, you know, we confirmed

12 it somewhere else.

13 Q Was that an option to use Mr. Royer as the source?

14 MR. BERKE: Objection -- well, withdrawn.

15 A No, usually not.

16 Q That's why independent verification was necessary?

17 A Yes.

18 Q Other than the conviction information did you get any

19 other information regarding NSOL from Mr. Royer?

20 A Yes.

21 Q What other information?

22 A That NSOL was under SEC investigation.

23 Q What did you do with that information?

24 A Gave it to Mr. Elgindy.

25 Q What did he do with it?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 887



1 A Gave it to the site.

2 Q Next I'm going to show you GX DC-242. I ask you to read

3 the highlighted portion out loud.

4 A At 17:02 Anthony states: It's official, SEC

5 investigating NSOL.

6 Q Now, did Mr. Brown deny the conviction?

7 A Yes.

8 Q After he did did you speak with Mr. Elgindy again?

9 A Yes.

10 Q Who called who?

11 A Tony called me.

12 Q What did he say?

13 A He wanted me to get Jeff back on the phone and to

14 100 percent confirm that Dr. Brown did in fact have a felony

15 conviction. Tony said that he was bothered by the way that

16 Mr. Brown had denied it in his phone call to Mr. Brown.

17 Q So, what did you do as a result?

18 A I called Mr. Royer.

19 Q What did you say to Mr. Royer?

20 A Told him about the conversation between Tony and

21 Dr. Brown and told him that we needed to know 100 percent

22 that, you know, we were talking about the same Paul Brown and

23 that he did have a felony conviction.

24 Q What did Mr. Royer say?

25 A He checked it out again and called me back and said that



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 888



1 it was the same Paul Brown and, yes, he did have a felony

2 conviction.

3 Q What did you do with that information?

4 A I gave it to Mr. Elgindy.

5 Q What did he do with it?

6 A He gave the information to the site.

7 Q I'm going to show you GX DC-243. Please read the

8 highlighted portion out loud.

9 A At 10:30 Anthony states: You may all now release the

10 convicted felon link on Dr. Paul hold em down Brown, it has

11 been verified 100,000 percent, put it anywhere you want.

12 Q Now, did it turn out that there was more to this issue of

13 the conviction?

14 A Yes.

15 Q What did you find out?

16 A That Dr. Brown's felony conviction had been expunged.

17 Q What does expunged mean?

18 A That the felony conviction went away, disappeared. I

19 don't really know how to explain it, that he no longer was a

20 convicted felon, it had been thrown out.

21 Q Did you communicate this to Mr. Elgindy?

22 A I believe it was Mr. Elgindy who was the one who found

23 out so, no, I didn't.

24 Q Did Mr. Elgindy talk about it on the AP site?

25 A Yes.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 889



1 Q I'm going to show you GX DC-248. Did Mr. Elgindy issue a

2 retraction?

3 A No.

4 Q What did he do?

5 A Told us that as far as he was concerned, he was a

6 convicted felon and to keep going after him.

7 Q Would you read the highlighted portions of GX DC-248.

8 A 10:25 Anthony states: Brown had his felony conviction

9 expunged. He can legally deny it ever existed unless he is

10 testifying in criminal case. I have the expungement document.

11 As far as anyone is concerned, he was convicted of a felony

12 period.

13 Q Did there come a time when you heard about the

14 negotiation for a block of stock of NSOL?

15 A Yes.

16 Q How did you hear about it?

17 A I heard about it from the site.

18 Q How did it come up?

19 A If I recall correctly, I believe Mr. Elgindy was asking

20 on the site who was short NSOL.

21 Q Did the block of stock actually come through for this

22 site?

23 A Yes.

24 Q Then or later?

25 A Later.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 890



1 Q How much time passed?

2 A I think a little over two months.

3 Q During the time between when you first heard about the

4 initiation of the negotiations for the block and the time it

5 actually happened, did pressure continue on the stock?

6 A Yes.

7 Q How?

8 A Through shorting the stock, selling the stock that put

9 pressure on you, again, negative posts and digging up more

10 information. As we were getting more information about

11 different things, of course, more people from the site began

12 either starting their short positions or adding to it which,

13 again, the selling pressure drove the stock downward.

14 Q Did there come a time when Mr. Elgindy asked members of

15 the site about their positions in NSOL?

16 A Yes.

17 Q In the AP chat room?

18 A Yes.

19 Q I'm going to show you GX DC-250 which is the log for

20 December 27, 2001. Please read the highlighted portions.

21 A At 11:13 Anthony states: Who here is short NSOL? Please

22 go here #secretprivate&sexyroom. By entering this room you

23 agree to the following terms, anything you see and hear you

24 will never repeat and you will never ever disclose to your

25 spouse and or second cousins.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 891



1 Q What is this room they're talking about?

2 A This is a room that is set up, again, when you have the

3 pound in this case, secretprivate&sexyroom, it is a separate

4 room set up from the main chat room, it is a private room that

5 you click on the link to go into the room and at the end when

6 the room is terminated there's no logs or anything that are

7 kept on the discussions in that room. Once the room is

8 terminated everything is gone.

9 Q And how did you take Mr. Elgindy's comments about the

10 conditions for entering the room?

11 A Basically he's saying that what's going to be talked

12 about in this room is secret and that by entering the room you

13 agree that you won't repeat anything that you hear or see in

14 this room and you will never disclose to your spouse or second

15 cousin; in other words, whatever you see in that room you keep

16 it to yourself period.

17 Q And the question about who is short NSOL?

18 A He's trying to get an approximate total of how many

19 people are short the stock, how many people is going to be

20 entering this room, then he can kind of determine how many

21 shares total are short out there.

22 Q Now, turning to GX DC-357, same day, short time later.

23 Please read the underlined portion out loud.

24 A At 11:38 Anthony states: NSOL if you are short you need

25 to pm me how many.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 892



1 Q Is that similarly a request to try to figure out what

2 people's positions are?

3 A Yes.

4 Q That's at 11:38. I'm going to show you GX DC-363. It is

5 at 11:45, same day. Please read the highlighted portion out

6 loud.

7 A Okay. 11:45 Anthony states: And being offered a block

8 at $1.50, working on a better price. They approached us and

9 are begging for us to go away.

10 Q Now, continue into GX DC-251.

11 THE COURT: 2 -- I'm sorry?

12 MR. BREEN: 251.

13 Q One minute later, please read the highlighted portions

14 out loud.

15 A At 11:46 Anthony states: We either do it all together or

16 we don't do it all. If we don't do it, we can expect a long

17 sit at these levels. Oh shit, oh shit, oh shit. Hansen erase

18 this log.

19 MR. BERKE: Judge, I would ask that the next line be

20 read as well.

21 THE COURT: I don't have it in front of me. What is

22 it again? Let me see.

23 MR. BREEN: It is on the screen.

24 MR. BERKE: It is on the screen, Your Honor.

25 THE COURT: LOL, LOL.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 893



1 MR. BERKE: Yes.

2 THE COURT: Meaning laugh out loud?

3 THE WITNESS: Yes.

4 THE COURT: Go ahead, Mr. Breen.

5 Q What did you take those comments to mean?

6 A That Tony is talking about the block of stock here, that

7 he does not want to be talking about the stock in the main

8 chat, that he has the wrong window up at this time and he's

9 talking about, you know, we either do it all together or we

10 don't do it at all, again, talking about the block. He

11 realizes that he's saying this stuff in main chat, he's not

12 meaning to and so he immediately yells, Hansen, erase this

13 log. And then, you know, then the laugh out loud, I guess he

14 thought it was amusing that he had said it in the main site.

15 Q What does it mean, we have a long sit?

16 A If we don't do it, we can expect a long sit at these

17 levels; what he's saying is that if we don't cover, if we

18 don't take this block and cover, we're just going to be

19 sitting at these positions, the money, your money is going to

20 be kind of dead money for a while, the stock is really not

21 going to be doing anything, we're just going to sit here and

22 wait and wait and wait and it would be better to go ahead and

23 cover and take that money and put it into another short of

24 another company and so he's just letting people know that if

25 we don't do this, we're just going to be sitting here waiting.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 894



1 Q Now, in the meantime is there any instruction from

2 Mr. Elgindy to the site regarding posting a message board?

3 A He wanted us to stay off the boards.

4 Q Next I'm going to show you GX DC-252. It is the next

5 day. Please read the highlighted portion.

6 A 10:39, paid4it asks: Are we laying off the NSOL message

7 board?

8 10:46 Anthony replies: We will lay off on NSOL till

9 next Monday or Tuesday. After that all bets are off. And the

10 Behrman disbarment gets posted everywhere. And the PhD proof

11 that he is a quack. Then I start calling all the doctor board

12 members and fax them his felony rap sheet.

13 Q In your view, what is happening there?

14 MR. BERKE: Objection, Your Honor.

15 THE COURT: No, I'll permit it.

16 MR. BERKE: Your Honor, may we approach on this?

17 THE COURT: No, it is all right, I'll permit it.

18 Go ahead.

19 A What he's saying here is we're going to lay off NSOL

20 until next Monday or Tuesday; in other words, we're not going

21 to say anything negative about it, after that all bets are

22 off; if they don't come to us with the block of stock by next

23 Monday or Tuesday all bets are off and the Behrman disbarment

24 gets posted everywhere. In other words, we're going to start

25 throwing more and more negative information on top of them, on



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 895



1 top of the company to keep driving down the stock, to keep

2 pressuring them until they finally come forward with the block

3 of stock.

4 THE COURT: I just want to remind you again, folks,

5 this witness is giving us his interpretation of the intended

6 meaning of that conversation. It may or may not coincide with

7 the meaning intended by all the speakers.

8 Go ahead, Mr. Breen.

9 Q Do you remember whether that deadline was met?

10 A It was not met.

11 Q Was additional pressure applied?

12 A Yes.

13 Q I'm going to show you GX DC-256. Please read the

14 highlighted portion out loud.

15 A At 13:31 milliondollars states: Tony, you have been real

16 low key about NSOL.

17 Anthony replies: Okay, I'll move to the lowest key

18 on it. Thanks for heads up.

19 Q Next I'm going to show you GX DC-358. Let me just go

20 instead to GX DC-258.

21 THE COURT: 258?

22 MR. BREEN: Yes.

23 THE COURT: Before this case is over you're going to

24 explain to us your numbering system I hope, because I'm

25 getting a broken wrist here.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 896



1 All right. 258. Go ahead.

2 MR. BREEN: As soon as I figure it out myself.

3 A At 15:16 Anthony states: For now you may resume all you

4 want on NSOL, I'm taking off my nice hat. Let the Behrman

5 link fly.

6 Q What did you take this to mean?

7 A That --

8 MR. BERKE: Objection, Your Honor.

9 THE COURT: Overruled.

10 A NSOL did not come through with the block of stock. He's

11 saying for now you may resume all you want on NSOL. In other

12 words, we can start -- we can continue posting negative

13 information, continue shorting the company, keeping pressure

14 on them. Then he says let the Behrman link fly and basically

15 that's what I call, that's a shot across the bow, we're

16 throwing out one of the very negative things that we have,

17 we're putting something very negative that we know about

18 somebody involved with the company out for the public to see

19 to let these guys know that, you know, we're not messing

20 around with them, that we're going to keep nailing them with

21 stuff until this block of stock comes through.

22 Q Did the pressure continue after this?

23 A Yes.

24 Q I'm going to show you GX DC-267. Please read the

25 highlighted portion.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 897



1 A Anthony states: NSOL is trying to do some scammy deal

2 with JP Turner on NSOL. NSOL is a fraud. Dr. Brown will be

3 my bitch. And then he repeats that.

4 Q Next, GX DC-270. Same day, a couple of hours later.

5 Please read the highlighted portions.

6 A 12:28 Anthony Pacific states: JP Turner is going down in

7 flames, so is NSOL. Dr. Fraud Brown is going to see what it

8 is like to be on the flip side of my wrath.

9 Then Doorman states: NSOL's demise could rank as

10 the sweetest yet on this site and there have been many

11 noteworthy ones.

12 Q Meanwhile, was the block still being negotiated as far as

13 you knew?

14 A Yes.

15 Q Showing you GX DC-280. Please read the highlighted

16 portion.

17 A 10:27 Anthony states: NSOL does a deal at one buck.

18 Glasshouse states: Wasn't that the one that was

19 going to sell us stock?

20 Anthony says: NSOL ain't doing nothing. I would

21 definitely stay shorted. I wouldn't cover a share.

22 Q And then GX DC-283.

23 A At 20:01 Mage says: What do we need to do to help flush

24 NSOL down the toilet?

25 Anthony says: Shh, there is a reason for



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 898



1 everything.

2 Q Now, during this time period did you get additional

3 information regarding the NSOL stock?

4 A Yes.

5 Q From whom?

6 A Mr. Royer.

7 Q Where was Mr. Royer at the time?

8 A He was in Tony's office in San Diego.

9 Q Where were you?

10 A I was in Oklahoma City.

11 Q How did he contact you?

12 A By phone.

13 Q What did he say when he contacted you?

14 A He contacted me and told me that I needed to get a big,

15 big short position in NSOL, that Tony was negotiating a block

16 and that I needed to be short so I could cover into the block.

17 Q Did you ask Mr. Royer what would happen if there was no

18 block?

19 A Yes.

20 Q What did he say?

21 A When I asked him that he said that we'd just keep

22 pressuring the stock down.

23 Q Did Mr. Royer say what NSOL would get from the deal?

24 A Yes.

25 Q What did he say?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 899



1 A That we go away, we leave them alone.

2 Q What did that mean?

3 A That means that we no longer short their stock, we no

4 longer post negative things about the stock, we just leave

5 them alone and move on to something else.

6 Q Did there come another time when Mr. Elgindy asked people

7 for their short positions on the site?

8 A Yes.

9 Q Show you GX DC-286. Please read the highlighted

10 portions.

11 A At 22:09 Anthony asks: Who here is short NSOL. Pm with

12 the number. We are pulling out of NSOL. NSOL coverage

13 terminated for good. We are getting out of NSOL.

14 Henk says: I just read the log. Why is NSOL

15 terminated? I do not see any big new developments other than

16 the price went down and a big block trade was printed at $1.

17 Q What does coverage terminated mean?

18 A Coverage terminated means that we are no longer covering

19 the stock, that there's -- we're eliminating our research and

20 everything else on the stock, no more posts, we're done with

21 it period.

22 Q Going away, as you mentioned before?

23 A Yes.

24 Q What happened next?

25 A What I remember next was the block deal was done.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 900



1 Q I'm going to show you GX DC-289. Please read the

2 highlighted portions.

3 A At 7:49 Anthony states: How many NSOL you have? Well

4 today you get to cover at $1.25 to $1.30. I think we can bid

5 at $1.27 and it will get hit, then they're going to take it

6 back up.

7 Q What is going on there?

8 A Tony is explaining to the people on the site that if

9 you're short NSOL, that today you get to cover he says at a

10 buck 25 to a buck 30. Then he comes out, he says you can bid

11 $1.27 and get hit. Then he says after everybody is covered

12 and the block is gone then they're going to take the stock

13 back up.

14 Q What does that mean?

15 A It means that according to Tony, somebody is going to

16 take the stock back up so if you don't cover and the stock

17 starts going back up, as a short seller you're going to begin

18 losing money so, you know, you cover at $1.27.

19 Q That's 7:51. Same day, this is GX DC-290. Please read

20 the highlighted portions out loud.

21 A Anthony psot the room #private. Who here is short NSOL?

22 Pm how many shares you got please, prepare for audio

23 15 minutes after, everyone please.

24 Q I'm going to show you next GX DC-291. Please read the

25 highlighted portions.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 901



1 A 9:45 states: NSOL cover at $1.27 to $1.35.

2 Q Is that an official cover call?

3 A Yes.

4 Q Next, GX DC-292, again same day. Please read the

5 highlighted portion.

6 A 9:56 Anthony Pacific states: NSOL cover $1.27 to $1.35.

7 Put your bids in please if you want, I know the seller. Then

8 he asks, who covered at $1.31 and $1.32?

9 Q Then a little bit later, same day, GX DC-264. Please

10 read the highlighted portions.

11 A At 10:57 Anthony Pacific states: NSOL piece is

12 officially gone I am being told.

13 Q What does that mean?

14 A The block is gone, the covering has bought up all the

15 block.

16 Q Was everyone on the site happy with the NSOL deal?

17 A No.

18 Q I'm going to show you GX DC-288. Please read the

19 highlighted portion.

20 A At 14:22 Peter states: I forgot the explanation for the

21 morality of the NSOL arrangement. Need it again.

22 Parnell says: Peter money.

23 Peter replies: Take compass in for adjustment

24 Parnell.

25 Q After that was the ban on discussing NSOL enforced?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 902



1 A No.

2 Q Was it initially enforced?

3 A Yes.

4 MR. BERKE: Objection.

5 THE COURT: Overruled.

6 Q Who was it enforced by?

7 A Mr. Elgindy.

8 Q I'm going to show you GX DC-314. I ask you to read the

9 highlighted portions. You can read the whole sentence.

10 MR. BERKE: What number?

11 THE COURT: 314.

12 MR. BREEN: 314.

13 MR. BERKE: Thank you.

14 A At 9:40 Wolff states: NSOL announced today that it is

15 submitting for a technology grant under energy, the US

16 Department of Energy's nuclear research initiative.

17 Anthony states: NSOL is a banned topic.

18 Q Next I'm going to show you GX DC-327. Please read the

19 highlighted portions.

20 A At 11:42 Jmulvey says: Am I allowed to say NSOL?

21 Anthony Pacific replies: You can say it. But I

22 won't talk about it. NSOL really can't be discussed here. I

23 made a deal and I am to keep my word.

24 Nico says: Deal?

25 Anthony says: Nico, why don't you pm me.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 903



1 Q What does that last comment mean?

2 A The Nico why don't you pm me?

3 Q Yes?

4 A He's telling Nico to private message him.

5 Q Rather than discuss it in the chat room?

6 A Correct.

7 Q Next I'm going to show you GX DC-329. Please read the

8 highlighted portions.

9 A At 13:47 Anthony Pacific says: Okay, maybe I was

10 stuttering, NSOL cannot be discussed in this chat. Then he

11 repeats that. Thank you. No, I said you could say the

12 symbol.

13 Q Did there come a time when something happened to

14 Mr. Brown?

15 A Yes.

16 Q What?

17 A He was killed in an automobile accident.

18 Q Was this discussed on the site?

19 A Yes.

20 Q What was the result?

21 A The ban was lifted and we could begin talking and

22 shorting NSOL again.

23 Q Next I want to show GX DC-331.

24 MR. BERKE: If I could just have one moment?

25 (Pause.)



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 904



1 MR. BERKE: Judge, may we approach for one minute?

2 THE COURT: Sure.

3

4 (The following takes place at side-bar.)

5 MR. BERKE: Judge, this is a question about a joke,

6 whether it should be shown.

7 THE COURT: Yeah. Why don't you just limit it to

8 9:03. Obviously they're being sarcastic. I don't need this

9 aggravation.

10 MR. BREEN: It's obvious to us, that's why we

11 thought there wasn't anything wrong with it.

12 THE COURT: That's why we don't need it. NSOL ban

13 is off.

14 MR. BREEN: Okay.

15 (End of side-bar.)

16

17

18 (Continued on next page.)

19

20

21

22

23

24

25



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 905



1 Q GX DC-331; please read the highlighted portion.

2 A At 9:03 Anthony states: NSOL no longer banned.

3 Q Now, continuing on to the next page.

4 A Anthony states: NSOL is no longer banned, feel free to

5 say what you like.

6 Q Later on the same day, GX DC-332.

7 A Peter asks: So what will happen to NSOL now?

8 Anthony replies: NSOL is toast.

9 Q Moving to GX DC-336. Please read the highlighted

10 portions.

11 A Trader one for you says: Yeah, but why was it banned in

12 the first place?

13 Glasshouse replies: Trader, because of "deal" with

14 Brown.

15 Who luvs ya says: Browns gone, all bets are off.

16 Q Then GX DC-341. Please read the highlighted portions

17 out loud.

18 A 8:49 Anthony says: NSOL e short 15% at $1.15. Don't

19 forget the CEO is now worm food and they have no product or

20 revenues.

21 Q Did you trade in NSOL stock?

22 A Yes.

23 Q Did you trade based on the law enforcement information?

24 A Yes.

25 Q On whose behalf did you trade?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 906



1 A On just mine.

2 Q Because why?

3 A By the time NSOL came around Mr. Royer was officed with

4 Mr. Elgindy and Mr. Elgindy had set up an account for Jeff to

5 trade on his own, therefore, the deal was just kind of off

6 then.

7 Q Until that point in time you were trading on yours and

8 Mr. Royer's behalf?

9 A Yes.

10 Q After that point in time only on your own behalf?

11 A Yes.

12 Q Did you get any of the block shares?

13 A No.

14 Q Have you heard of a company called BGI Industries?

15 A Yes.

16 Q How did you refer to it?

17 A BGII.

18 Q Was that the ticker symbol?

19 A Yes.

20 Q Do you remember how the site -- well, was it an AP site

21 stock?

22 A Yes.

23 Q Do you remember how the site became interested?

24 A Yes, it was another stock that was moving up rapidly,

25 price was going up quite a bit on a daily basis and the site



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 907



1 got interested as to why the stock was making the moves that

2 it was moving.

3 Q Did you do any research on it?

4 A Yes.

5 Q What did you do?

6 A Again, followed my normal procedure of going to the SEC

7 web site, Edgar, and pulling the financials to get names and

8 other information to give to Mr. Royer.

9 Q Did you give the names to Mr. Royer?

10 A Yes.

11 Q While he was still an FBI agent?

12 A Yes.

13 Q Did he provide you with information?

14 A Yes.

15 Q Again, while he was still an FBI agent?

16 A Yes.

17 Q When approximately was this?

18 A BGI, the play was around -- started around I think

19 November, December 2001.

20 Q So, it started while Mr. Royer was still an FBI agent and

21 continued after he left the FBI?

22 A Yes.

23 Q In the period of time prior to Mr. Royer leaving the FBI

24 did he provide you with law enforcement information regarding

25 BGII?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 908



1 A Yes.

2 Q What information did he provide you with?

3 A I had him run the CEO of the company, a gentleman by the

4 name of Reid Funderburk and he came back with nothing on

5 Mr. Funderburk but shortly after that in a few days after that

6 he had come to me and or called me and let me know that he had

7 just gotten off the phone with the Texas Rangers and that they

8 had begun raiding some of BGI's different places where they

9 had their charity machines and also seizing some of their

10 funds.

11 Q Who are the Texas Rangers?

12 A Texas Rangers are -- it is law enforcement people in the

13 state of Texas.

14 THE COURT: Is it akin to like the state troopers in

15 another jurisdiction?

16 THE WITNESS: Yes.

17 Q Now, again, when he provided you this information was

18 Mr. Royer still an FBI agent?

19 A Yes.

20 Q Did he provide you with any other information in this

21 time frame?

22 A Yes.

23 Q What did he provide you with?

24 A He told me that the SEC was looking at BGI informally at

25 that time.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 909



1 Q What did you do with this information?

2 A I gave the information to Mr. Elgindy, I gave the

3 information to Mr. Daws, Jonathan Daws, I gave it to Quack,

4 and I gave it to Nico.

5 Q What information did you give them?

6 A That the -- that BGI, different places where they had

7 their machines was being raided by the Texas Rangers, that the

8 machines were being seized, that different bank accounts they

9 had were being seized and that the SEC was informally looking

10 at them.

11 Q Did you tell them where you received the information?

12 A Yes.

13 Q What did you tell them in that regard?

14 A That the information had come from Jeff.

15 Q Do you remember what it was that Mr. Elgindy did with the

16 information?

17 A He eventually put some of it out to the site. It seems

18 like it took a little while but eventually it went out to the

19 site.

20 Q Did he make a trading call?

21 A Yes.

22 Q Do you remember whether he made the trading call before

23 or after you provided him with the information?

24 A It was after I provided him with the information.

25 Q Did the BGII post on the AP site continue?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 910



1 A Yes.

2 Q After receiving the additional information from Mr. Royer

3 did you get additional information?

4 A Yes.

5 Q What did you hear next?

6 A That the SEC investigation had become an official SEC

7 investigation, it was no longer informal, it was official and

8 also he informed me that the raids and the seizures were still

9 taking place.

10 Q When did you receive this information?

11 A I received this information, it was in early to mid-

12 December of 2001.

13 Q And the SEC information, was that received in the same

14 time frame?

15 A Yes.

16 Q Who did you communicate this new information to?

17 A Mr. Elgindy, Mr. Daws, Quack and Nico.

18 Q Did Mr. Elgindy release any of the information on the AP

19 site?

20 A Eventually he did, yes.

21 Q I'm going to show you what's been marked GX DC-261. I

22 ask you to read the highlighted portions.

23 MR. BERKE: Which number?

24 MR. BREEN: 261.

25 MR. BERKE: Thank you.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 911



1 THE WITNESS: At 9:35 Rube states: What about BGII?

2 Doorman says: Tony, is it a scam, turd or just

3 overvalued or what?

4 Anthony says: BGII has smart cards and online

5 sweepstakes try to remember.

6 Doorman says: Sorry, not sure what your BGII

7 comment implies besides ques business model.

8 Anthony says: BGII has 50,000 in cash. I think a

9 quick preview of the 10k should suffice for anyone to decide

10 on their own or the latest q.

11 Q Now, continuing on the same day, a short while later,

12 GX DC-262.

13 A 10:03 Anthony says: To answer the question on BGII, it's

14 junk and a scam. I don't want to say much in here on BGII.

15 When I have stuff to say it will all just come out at once.

16 And Ectoby says: Join now (ph) is the room where

17 you can find out more about BGII.

18 Q Did the information come out at that point in time?

19 A No, it did not.

20 Q Next I'm going to show you GX DC-26 9. Please read the

21 highlighted portions out loud.

22 A At 11:36 Kris states: Tony you should tell everyone what

23 you know on BGII.

24 Anthony replies: Kris, I'm sorry, I can't do that

25 either, the stuff I know would fill a stadium.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 912



1 Q Now, you mentioned before that there was a date when you

2 were in Mr. Elgindy's office in January; do you remember what

3 that date was?

4 A It was around January 9th, January 10th.

5 Q And we're going to talk about that but was that when

6 Mr. Royer went out to move out to San Diego to work for

7 Mr. Elgindy?

8 A Yes.

9 Q And you went out with him for a brief while?

10 A Yes.

11 Q While you were there in the office did you speak about

12 BGII?

13 A Yes, we did.

14 Q Who was involved in the discussion?

15 A Mr. Elgindy, Jonathan Daws, Mr. Royer and myself.

16 Q Describe the discussion?

17 A While we were in the office Tony's phone rang and it was

18 Jonathan Daws. Tony had him on speaker phone. Tony said

19 that -- told Jonathan that Jeff and Derrick are here in the

20 office, we both said hello to him and talked just little small

21 talk and then Jonathan told Tony that he needed help on BGII,

22 that he wanted to do a report or something, you know, to try

23 to stop the stock from moving up on him and he offered to

24 write -- he said if we would do a report, he offered to write

25 the report himself and that if we were not going to do a



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 913



1 report, then he was just going to have to start covering.

2 Q What did Mr. Elgindy say?

3 A He said that we could do a report.

4 Q Was a report done?

5 A Yes.

6 Q How long after Mr. Daws' request?

7 A I think it was about the same day.

8 Q Did you trade in BGII stock?

9 A Yes.

10 Q Did you trade based on the law enforcement connection?

11 A Yes.

12 Q On whose behalf?

13 A Jeff and I.

14 Q Do you remember whether you made or lost money?

15 A I made money on BGII.

16 Q Have you heard of a company called Medi-Hut?

17 A Yes.

18 Q How did you refer to it?

19 A MHUT.

20 Q MHUT?

21 A Yes.

22 Q That was the ticker symbol?

23 A Yes.

24 Q Was MHUT an AP site stock?

25 A Yes.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 914



1 Q Do you remember how it was initiated?

2 A Again, it was a stock that was talked about on the site,

3 I don't remember who brought it, but it was a stock that was

4 discussed by different people on the site.

5 Q Did you do any research on it?

6 A Yes.

7 Q What did you do?

8 A Went to Edgar online, pulled the financials, pulled the

9 names of the people involved with the company, other

10 information, gave it to Mr. Royer, had him do his normal

11 checks on it.

12 Q When was that approximately?

13 A That was, from what I could remember, the early fall of

14 2001, around September, October 2001.

15 Q Did Mr. Royer provide you with any information?

16 A Yes.

17 Q What information did he provide you with?

18 A He said that there was an organized crime link to

19 Medi-Hut.

20 Q Did you tell anybody this information?

21 A I told Mr. Elgindy.

22 Q Did Mr. Elgindy publish it at that point in time?

23 A No.

24 Q In this point in time did MHUT become an AP site stock or

25 was it later?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 915



1 A It was later.

2 Q When did it later become an AP site stock?

3 A It became an AP site stock in early 2002 I believe.

4 Q Was this at the point in time when Mr. Royer had already

5 left the FBI and moved to San Diego to work for Mr. Elgindy?

6 A Yes.

7 Q Where were you when it came up again?

8 A I was in Oklahoma City.

9 Q How did it come up again?

10 A Mr. Royer called me, told me to pull up the symbol MHUT

11 which I did, I knew the stock. He told me that I should be

12 involved with it because organized crime was involved with the

13 company and I kind of laughed and said, you know, you told me

14 this six months ago, and so, anyway, to let him know that I

15 already knew that.

16 Q What did he say?

17 A He just kind of laughed because he had repeated this, you

18 know, told me something again and he just said, well, I

19 thought I'd let you know.

20 Q Do you know whether Mr. Royer had any new information

21 regarding MHUT?

22 A No.

23 Q Did there come a point in time after that when

24 Mr. Elgindy released that information regarding the mob

25 connection to the site?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 916



1 A I believe so, yes.

2 Q I show you what's been marked GX DC-294. Please read the

3 highlighted portions out loud.

4 A Anthony states: MHUT is a mob stock, IMO.

5 THE COURT: IMO?

6 THE WITNESS: In my opinion.

7 Q Was an Insider Truth report later released regarding

8 MHUT?

9 A Yes.

10 Q Do you remember whether the mob information was included

11 in it?

12 A I don't believe it was, no.

13 Q Did you trade in MHUT stock?

14 A I think I did early on but not during that period of time

15 I didn't.

16 Q Did you trade based on law enforcement information?

17 A Yes.

18 Q On whose behalf?

19 A Jeff and I.

20 Q Do you remember whether you made money or lost money?

21 A I think I made a little bit of money on it, not a whole

22 lot.

23 Q Have you heard of a stock called Investco?

24 A Yes.

25 Q How did you refer to it?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 917



1 A IVSO.

2 Q Was IVSO an AP site stock?

3 A Yes.

4 Q How was it initiated?

5 A I'm not sure how it was initiated. I know that it was

6 talked about on the site one day and everybody on the site

7 became aware of it.

8 Q When did it come up on the site?

9 A It came up on the site in early April of 2002.

10 Q When you say the site, you're referring to the AP site?

11 A Yes.

12 Q So, again, in the period of time after Mr. Royer left the

13 FBI?

14 A Yes.

15 Q During the point in time when Mr. Royer was with

16 Mr. Elgindy in San Diego?

17 A Correct.

18 Q Did you do any research on IVSO?

19 A No, I did not.

20 Q Why not?

21 A I was actually traveling by car from California back to

22 Oklahoma City and I actually found out about IVSO, I called

23 from the hotel room in New Mexico and talked to Art Solenski

24 at Global Securities and asked him what was going on that day

25 and he told me IVSO was in play on the AP site.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 918



1 Q Did you talk to anybody else about IVSO?

2 A Yes.

3 Q Who did you talk to next?

4 A Mr. Royer.

5 Q What did he say?

6 A I called him and asked him what was going on with IVSO.

7 He said that it was a scam stock that they were working on and

8 told me that some people that he knew from the past were

9 involved with the company.

10 Q Did he say who those people were?

11 A Yes.

12 Q Did he say how he knew them from the past?

13 A From the BBAN investigation.

14 Q Tell us what he said?

15 A He said that Tony was going through the financials and

16 read off the name Michael Zapetis (ph) and Jeff was sitting

17 there as Tony said the name and Jeff is like Michael Zapetis,

18 I know him, I investigated him on the BBAN deal and, anyway,

19 then Mr. Royer proceeded to tell me that Michael Zapetis was

20 tied up with Don Knight who was one of the promoters on the

21 BBAN investigation and that one of the companies, kind of a

22 fictitious company that Don Knight used in the BBAN pump and

23 dump was a company, I think it was called Mercury Insurance

24 and that that same company had been mentioned in the IVSO

25 press release.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 919



1 Q What did Mr. Elgindy do with the information?

2 A He gave it out to the site.

3 Q Show you what's been marked GX DC-321. Please read the

4 highlighted portions.

5 A At 11:29 Anthony Pacific states: IVSO sell short 40% at

6 $3.90, fake news of takeover, companies don't exist.

7 (Continued on next page.)

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 920



1 Q The same day at 11:46 GX DC-371, please read the

2 highlighted portion there.

3 A Anthony Pacific states: That's Mike Zapetis' wife, the

4 scum bag behind BBAN. Go audio.

5 Q Again, information that Mr. Royer said he knew from his

6 BBAN investigation?

7 A Yes.

8 Q Mr. Royer said he needed to discuss with Mr. Elgindy?

9 A Yes.

10 Q Next I'm going to show you GX DC-325, same day at 15:30.

11 Please read the highlighted portion.

12 A Anthony Pacific states: Michael Zapetis is the largest

13 shareholder in IVSO.

14 Q Then GX DC-328, the next day at 12:08.

15 A Anthony Pacific states: Mercury Insurance in the IVSO

16 deal is the same deal that was involved in BBAN.

17 Q Once again information you received from Mr. Royer that

18 then Mr. Royer said he communicated to Mr. Elgindy?

19 A Yes.

20 Q Did Mr. Elgindy put out an InsideTruth report regarding

21 IVSO?

22 A Yes.

23 Q I show you what's been marked Government Exhibit DC-333,

24 April 9th, 2002. Please read the highlighted portions.

25 A At 11:20 Anthony Pacific states: InsideTruth advisory is


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 921



1 out. IVSO on InsideTruth. As you all know I am short already

2 from higher levels.

3 Q Next, GX DC-3034. Please read the highlighted portions.

4 A Presence says: IVSO nice concise report, with a smiley

5 face. That report -- Anthony Pacific says: That report took

6 a long time. Can U review InsideTruth and tell me if anything

7 is factually incorrect.

8 11:03 Mweka states: Mercury Surety and Insurance

9 Company is also owned by Zapetis. Where did you get that.

10 Anthony Pacific replies: I just got it.

11 Q Please look at the binder in front of you at Government

12 Exhibit 3034.

13 A (Complying)

14 Q What is that?

15 A This is the InsideTruth IVSO report.

16 MR. BREEN: Your Honor, the government offers 3034.

17 MR. BERKE: May I just have one moment, your Honor?

18 THE COURT: Sure.

19 (Pause).

20 MR. BERKE: No objection.

21 MR. GERZOG: No objection.

22 THE COURT: 3034 in evidence.

23 (Government Exhibit 3034 in evidence.)

24 Q You said this is the InsideTruth IVSO report?

25 A Yes.


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 922



1 Q Would you read the paragraph in the small letters

2 beginning with "announces"?

3 A Okay. Announces that the fraudulent tender offer made by

4 FIFC for shares of IVSO was made by Mr. Mike Zapetis.

5 Mr. Zapetis is a convicted felon who was sentenced to 15 years

6 for drug offenses. He operates out of his penthouse luxury

7 condo in Miami on Bay Shore Drive.

8 Q Stop there.

9 Do you know whether Mr. Elgindy received that

10 information?

11 A No, I do not.

12 Q Please read the second paragraph.

13 A Mercury Surety and Insurance Company is also owned and

14 operated by Zapetis and is a Costa Rican enterprise.

15 Mr. Zapetis is a good friend of Don Knight who remains a

16 fugitive from justice and according to SEC is suspected to be

17 in Costa Rica. We are continuing our investigation to see if

18 Zapetis and Knight are working together on this latest pump

19 and dump. We have a target of two cents within three months.

20 Q Do you know where that information came from?

21 A Yes, that information came from Mr. Royer.

22 Q Did there come a time after that that Mr. Elgindy called

23 a cover on the AP site?

24 A Yes.

25 Q I show you GX DC-372. Please read the highlighted


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 923



1 portion outloud.

2 A 8:46 Anthony Pacific states: IVSO cover at a 1.11 down

3 from 3.90 official.

4 Q Now, after the cover was called on the private site, was

5 there any notice about this posted on the InsideTruth public

6 site?

7 A No, there was not.

8 Q Was there any update to the report?

9 A No, there was not.

10 Q Was this AP site cover leaked anywhere?

11 A Yes.

12 Q What does "leak" mean?

13 A Leak, that somebody from the AP site gave the information

14 to somebody outside of the AP site.

15 Q Was that something that people were supposed to do?

16 A No, they were not.

17 Q Who was it leaked to?

18 A A reporter named Carol Remond.

19 Q Do you know the news agency that she works for?

20 A I think Dow Jones, I think. I'm not real sure.

21 MR. ISAACSON: Sorry, your Honor, I couldn't hear

22 that last one.

23 THE COURT: Dow Jones.

24 Q Was this discussed on the AP site?

25 A Yes.


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 924



1 Q I show you GX DC-338. Please read the highlighted

2 portion.

3 A At 10:55 Anthony Pacific states: Who is the ungrateful

4 asshole who called Carol Remond and told her I called a cover

5 on IVSO for the site.

6 Q What did you take this comment to mean?

7 A That Mr. Elgindy was upset that his cover call had went

8 out beyond the site.

9 Q Did you trade in IVSO stock?

10 A No, I did not.

11 Q During the time period after Mr. Royer moved to San

12 Diego, did he travel to visit with Mr. Daws?

13 A Yes.

14 Q Do you remember when that was approximately?

15 A That was approximately -- that was late February to early

16 March of 2002.

17 Q Did you talk to Mr. Royer before he left?

18 A Yes.

19 Q Did he tell you why he was going?

20 A Yes.

21 Q What did he say?

22 A He was going out there to -- Mr. Daws was in Dallas, to

23 -- basically for employment purposes, to see if there was

24 anything that he could do for Mr. Daws or his hedge fund that

25 he could be paid, paid for.


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 925



1 Q Did you speak with him when he came back?

2 A Yes.

3 Q Did he tell you whether he was going to do research on

4 any particular stock?

5 A Yes.

6 Q What did he tell you?

7 A That Jonathan Daws' fund, Griffin Partners, as well as

8 another fund that shared an office with Daws, a fund called

9 Cardinal Fund, both of the funds were short Imclone stock,

10 IMCL, and they were looking for information, negative

11 information on the company to help them out in their short.

12 They had told Mr. Royer that if he could come up with some

13 damaging information, something that helped them out, that

14 they would pay him some percentage, they hadn't decided on how

15 much they would pay him, some percentage for his information.

16 Q Now, after that discussion, did you observe Mr. Royer

17 doing research on Imclone stock?

18 A Yes.

19 Q What did you see and hear him doing?

20 A He was on the telephone. We were in Tony's office and my

21 desk was kind of next to both of them but I was pretty close

22 to him and I just heard him on the phone talking, he kept

23 saying the name Imclone, said the name Waksal which I knew

24 that Sam Waksal was the CEO of Imclone, said a few other

25 things. And he finally hung up the phone and I just looked at


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 926



1 him and he said that that was Lynn and she was going to run

2 some stuff and see what she could find.

3 Q Who did you take Lynn to be?

4 A Lynn Wingate, his girlfriend at the time, who was an FBI

5 agent in Albuquerque, New Mexico.

6 Q And again, Mr. Royer said that Lynn was going to do what?

7 A Was going to run some stuff on the company and see if she

8 came back with anything.

9 Q Did Mr. Royer ever tell you whether he received any

10 information from Ms. Wingate?

11 A No.

12 Q Did Imclone come up on the site at all?

13 A Yes.

14 Q The AP site?

15 A Yes.

16 Q I show you GX DC-317, a chat log for March 5th, 2002.

17 Please read the highlighted portion.

18 A At 9:56 Anthony states: I cannot say what on IMCL is

19 just that I would never be long at this point. Just tell Mark

20 leh what I said. I gotta run.

21 Q Who is Mark Leh?

22 A He is a gentleman by the name of Mark Felberg who was one

23 of the guys on Tony's site.

24 Q Do you know whether there was a specific reason that

25 Mr. Elgindy wanted to advise Mr. Felberg regarding Imclone?


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 927



1 A Mr. Felberg had a large long position in Imclone stock.

2 Q Okay.

3 Now, just follow the page down and read the other

4 comment.

5 A At 10:00 Archer states: I second the sentiment on IMCL.

6 I am hearing very good short sellers still on it. Don't be

7 long.

8 Q Archer again was who?

9 A Jonathan Daws.

10 Q The person that Mr. Royer said he was doing Imclone

11 research for?

12 A Yes.

13 Q Did you trade in Imclone stock?

14 A I think I did at some time but not during this time, I

15 don't think I did.

16 Q Now, you have testified about the InsideTruth site and

17 some things on it that you testified were not truthful or

18 accurate?

19 A Correct.

20 Q I want to ask you some questions about the AP site.

21 Was there a public portion of the AP private site?

22 A Yes.

23 Q What generally could the public see by looking at the AP

24 site?

25 A If they went to the AP site home page, they could see


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 928



1 kind of the philosophy of the site, I think the player -- some

2 of the main players on the site were mentioned as well as some

3 of the information about what we did on the site was also on

4 that home page.

5 Q But just so we are clear, the public wouldn't be able to

6 see the chat discussions that you have testified so much

7 about?

8 A No, they would not.

9 Q Or the private messages or the other information?

10 A No.

11 Q Would you look at Exhibit 3003?

12 A Sure.

13 Q What is that?

14 A This is a copy of the home page of AnthonyPacific.com.

15 Q So is this something somebody would be able to see

16 without having to join?

17 A Correct.

18 MR. BREEN: Your Honor, the government offers 3003.

19 MR. BERKE: Your Honor.

20 THE COURT: I had a vague recollection it was in

21 evidence but in any event... Is there any objection to 3003?

22 MR. BERKE: If I can have one moment, your Honor.

23 (Pause)

24 MR. BERKE: Your Honor, we have no objection for the

25 purpose of what it's being offered for, that is, the site at a


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 929



1 specific point in time. In other words --

2 THE COURT: Is there an objection to what is being

3 offered?

4 MR. BERKE: No, your Honor.

5 THE COURT: Thank you. It's received. 3003 now in

6 evidence.

7 (Government Exhibit 3003 in evidence.)

8 Q Now, you have testified about language similar to some of

9 the language in here so we won't repeat that but I want to

10 focus you on a few different things that are said in the

11 public portion of the AP site.

12 A Okay.

13 Q First, read the first sentence in the box marked Site

14 Philosophy and Message from A@P.

15 A This is a private research site and all fees collected

16 are used in maintaining the site.

17 THE COURT: Could I impose? I should have done this

18 a second ago because we were obviously segueing into a

19 different area, I would like to give the jury a short break.

20 Step inside, folks, and relax. We will take a short

21 break and resume momentarily.

22 We are going to break today at 20 minutes of 5:00 so

23 we will take a short ten minutes again.

24 THE CLERK: All rise.

25 (The jury leaves the courtroom.)


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



930



1 THE COURT: Ten minutes. I have to go to a meeting

2 across the way. I have to split at 20 minutes to 5:00 as much

3 as I would rather not.

4 You are down to eight minutes and 53 seconds.

5 (A recess was taken.)

6 THE COURT: Wednesday and Thursday 4:30 conclusion.

7 One juror has a religious obligation and another juror has a

8 parent/teacher. That will put in context what I'm about to

9 say to them.

10 (The jury enters the courtroom.)

11 THE COURT: Please be seated, folks.

12 There are times when I wait for you to come in I can

13 almost hear Ellen's whip cracking back there.

14 You have been a terrific jury and we are very, very

15 much appreciative of the fact you don't keep us waiting.

16 Today we kept you waiting as I said for good reason.

17 I understand that there are a couple of needs that

18 Ellen has interceded on your part and I'm happy to accommodate

19 two of you.

20 On Wednesday and Thursday we will break at 4:30.

21 I will always do what I can within reason to

22 accommodate reasonable requests. But please understand if

23 there is an occasion where I have to disappoint somebody,

24 there is a good reason for that as well. I'm happy to do it

25 this time. I realize it's the season of school parent/teacher


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 931



1 conferences and things of that sort that are important and to

2 the extent we can within reason accommodate them, I'm happy to

3 do it particularly for such a jury who has been so

4 responsible, on time and everything else.

5 So with that, we will continue on now for about 55

6 minutes, Mr. Breen.

7 MR. BREEN: Thank you, your Honor.

8 BY MR. BREEN:

9 Q Mr. Cleveland, before the break you were testifying about

10 the public portion of the private AP site and I just want you

11 to read the first sentence in the paragraph there where it

12 says Site Philosophy and Message from A@P.

13 A This is a private research site and all fees collected

14 are used in maintaining the site. Members receive the ability

15 to broadcast important information to all members that have

16 voluntarily supplied their e-mail address. The owners of the

17 site have no control over any of the information that is

18 broadcast by any member and the owners of the site do not

19 review the information before it is broadcast.

20 Q Stop there.

21 Focusing on each of those three sentences, the first

22 sentence with regard to site fees, do you consider that to be

23 a true statement?

24 A No.

25 Q Why not?


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 932



1 A Site fees, you know, I don't know exactly what they were

2 but based off of what I was paying and other people was paying

3 and you have, you know, between 2 and 300 members on the site,

4 I know that it was -- from my calculations was in excess of

5 $100,000 a month and to maintain a web site, I don't agree

6 with that. I think that's excessive.

7 Q Turning to the second sentence there, do you consider

8 that to be a true statement?

9 A Members receive the ability to broadcast important

10 information to all members that have -- no, I don't. I don't

11 think that that was an ability that the normal members had.

12 I know that that was an ability that Mr. Elgindy had

13 and the guys in blue had that capability but as far as just

14 regular people on the site, the guys in black, no.

15 Q And then the third sentence dealing with the owners

16 having no control, do you consider that to be a true

17 statement?

18 A No; that's not true.

19 Q Why not?

20 A Mr. Elgindy controlled pretty much everything that went

21 on on the site, the things that were said. If you said

22 something and he didn't like what you said, he would kick you

23 off the site for the day. He wanted, with me, whatever

24 information I had, he wanted it brought to him first and then

25 if it was information that he felt should be shared to the


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 933



1 site, then he would give it out to the site. So he did

2 control the information of the site.

3 Q There are other examples of control as well?

4 A Yes.

5 Q Now, focusing on the bottom, the description of

6 Mr. Elgindy, starts on the bottom of the first page and will

7 continue over to the second, will you please read it outloud?

8 A About Anthony Pacific, Anthony Pacific is Anthony Elgindy

9 a professional trader and investigative analyst. He is also a

10 former NASDAQ market-maker, compliance officer, has owned two

11 NASD member firms and was licensed for over a decade. Anthony

12 resigned his membership in the NASD in 1998 after the NASD

13 implemented a series of rule changes that effectively

14 circumvented the excess spread sanction imposed by the

15 Securities Exchange Commission. These rule changes are partly

16 responsible for the increased volatility and tremendous

17 increased disadvantage faced by the average public investor.

18 Q Stop there.

19 That description that you read, did you consider

20 that to be an accurate description of Mr. Elgindy?

21 A No.

22 Q You testified already about similar type descriptions but

23 I want to focus you on the NASD information that's contained

24 there.

25 Did Mr. Elgindy tell you anything that was


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 934



1 inconsistent with the description that he had on the public

2 portion of his private AP site?

3 A Yes.

4 MR. BERKE: Objection, Judge.

5 May we approach?

6 THE COURT: I don't think it's necessary but in an

7 exercise of caution, I will be happy to.

8 MR. BERKE: Thank you, Judge.

9 (Continued on the next page.)

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STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Side Bar 935



1 (Side bar.)

2 MR. BERKE: Judge, I think this relates to the

3 second motion in limine on regulatory history. And I know

4 your Honor made some rulings but I don't think it's entirely

5 clear. I don't know what is being elicited, whether it's

6 consistent with those rulings.

7 MR. BREEN: My memory of the ruling which was very

8 specific pretrial was that whatever Mr. Elgindy said about

9 himself is fair game. I have asked him what Mr. Elgindy told

10 him about the NASD and the testimony is going to be that it

11 was inconsistent with that. He is going to describe what

12 Mr. Elgindy described as a suspension and refusal to pay a

13 fine rather than this voluntary withdrawal that he seems to

14 describe to make himself look better for the public.

15 THE COURT: It's not getting into any litigation,

16 just the NASD relationship?

17 MR. BREEN: Yes.

18 MR. BERKE: My understanding, Judge, this was in

19 response to the government's claim that it's relevant because

20 of his persona as a bad boy gone good.

21 THE COURT: It's relevant now because he makes

22 representations to the public regarding Anthony Pacific. If

23 he is a legitimate guy trying to do a service, why is he

24 misrepresenting himself?

25 MR. BERKE: There is evidence about what happened


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Side Bar 936



1 with the NASD. If your Honor is going to allow that in, we

2 can talk about -- we would argue as to what that means or what

3 it doesn't mean.

4 But what this witness is going to claim he was

5 personally told we would object to. It's different from, for

6 example, about his bad boy past. We conceded that that would

7 come in.

8 THE COURT: You handled it very cleverly in your

9 opening statement. I didn't hear that much about his bad boy

10 past.

11 MR. BERKE: I would say thank you but I'm not sure

12 that's a compliment.

13 THE COURT: I'm not in the business of throwing

14 compliments but you walked a thin line and at least during

15 your opening you stayed on it. Now the government is trying

16 to push you off a little bit and I think they have got the

17 right to do that.

18 (Side bar concluded.)

19 (Continued on the next page.)

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STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 937



1 (In open court.)

2 THE COURT: The book I'm going to publish when I

3 retire, hopefully in about 80 years, is what goes on at side

4 bars, because that's the question -- you remember I said ask

5 me at the end of the case what is going on -- that's the

6 question that jurors always ask because occasionally there is

7 a smile that breaks out and they think we are over there

8 entertaining each other, we are not, we are not. Sometimes we

9 break the tension with a little quip back and forth. But we

10 are over there discussing some serious business and it doesn't

11 concern you at all and it almost invariably does have the

12 result of moving things along.

13 So thank you for your forbearance.

14 Go ahead, Mr. Breen.

15 MR. BREEN: Thank you, your Honor.

16 BY MR. BREEN:

17 Q Did Mr. Elgindy describe his relationship with the NASD

18 to you in a way that's inconsistent with the way he described

19 it to the public on this web page?

20 A Yes.

21 Q What did Mr. Elgindy tell you about his relationship with

22 the NASD?

23 A What Mr. Elgindy told me in his relationship with the

24 NASD is that while he was a market-maker in his office at his

25 broker-dealer, that he was caught with what they call a SOES


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 938



1 machine, a Small Order Execution System machine, which he was

2 not supposed to have in his office. He was caught with this

3 machine. They proved that orders had been executed on the

4 machine and the NASD suspended him and fined him what I

5 remember I think it was $30,000 for this incident. He told me

6 that he was not going to pay the fine and as far as I know did

7 not pay the fine and the NASD suspended him indefinitely.

8 Q Now, looking on this page a little further down where it

9 deals with terms of use, what were the terms of use on the

10 site generally?

11 THE COURT: You are not asking him to read it?

12 MR. BREEN: No.

13 THE COURT: Generally state what the terms were.

14 A The terms of use were basically that you could come in

15 and participate on the site. What was said on the site, what

16 was said in the room stayed in the room. Things like you are

17 not to be abusive to other people, be respectful to people.

18 Things of that nature.

19 Q Rather than read this whole thing, I will focus you on a

20 few things here and ask you about them.

21 A Okay.

22 Q In number 1 it says: Scope of agreement, this is not a

23 financial advisory site. Did you consider that to be a true

24 statement?

25 A No.


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 939



1 Q Why not?

2 A It was a financial advisory site in my opinion because we

3 were being told what trades to do, what short sells to do and

4 when to cover those trades so we were being advised on our

5 trades.

6 Q Now, moving forward to page 4, terms of use, the

7 highlighted portions at the bottom where it talks about

8 financial advice, no investment advice is given and no implied

9 results should ever be expected. This site has no track

10 record and no such calculations are made. Did you consider

11 those to be true statements?

12 A No.

13 Q Then finally, just read the first sentence there, the top

14 of the page, that's page 5 of 6.

15 A We do not accept any form of payment from public

16 companies, broker-dealers, promoters or any third parties.

17 Q Did you consider that to be a true statement?

18 A No.

19 MR. BERKE: I object to this, Judge.

20 THE COURT: You say you would object?

21 MR. BERKE: I would, Judge.

22 THE COURT: Objection is overruled.

23 Go ahead.

24 Q Why?

25 A Because we did accept payment in the forms of blocks of


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 940



1 stock even though the stock was purchased from the site

2 because they were in essence buying the stock when we were

3 covering, it was a form of payment. Had they not given us the

4 block of stock or sold us the block of stock at a cheap price,

5 so that we could cover all of us covering that amount at the

6 same time, we would have driven the stock extremely high and,

7 you know, some people could have possibly ended up losing

8 money.

9 Q Would an example of that be NSOL?

10 A Yes.

11 Q Now, again, I want to back up in time and ask you some

12 questions about the point in time when Mr. Royer left the FBI.

13 You have testified that his last day with the FBI

14 was December 25th, 2001?

15 A Correct.

16 Q What was your and Mr. Royer's plan with regard to

17 Mr. Elgindy at that point in time?

18 A Mr. Royer and my's (sic) plan was when he went to work

19 for Mr. Elgindy, that he would, A, give me the companies that

20 he was investigating, tell me what companies that he was

21 investigating for Mr. Elgindy and that as he received

22 information on the companies, that he would immediately call

23 me and let me know what was going on with the investigations.

24 Q Where were you going to work?

25 A I was going to work in Oklahoma City.


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 941



1 Q When did Mr. Royer move to San Diego?

2 A Mr. Royer moved to San Diego -- it was around January

3 10th of 2002.

4 Q Did you go with him initially?

5 A Yes.

6 Q Why did you go?

7 A I was the one who introduced the two of them,

8 Mr. Elgindy, Mr. Royer, and I felt obligated to go for this

9 transition, to be out there for him moving to San Diego in an

10 office with Mr. Elgindy.

11 Q How long did you stay?

12 A I stayed I think four or five days.

13 Q At this point you still planned to work from Oklahoma?

14 A Yes.

15 Q After you returned to Oklahoma, did this plan change?

16 A Yes.

17 Q How did it change?

18 A Mr. Royer and Mr. Elgindy called me, they were on speaker

19 phone together not long after Mr. Royer had been out there, he

20 had been out there about a week, week and a half, somewhere in

21 there, and they asked me if I would consider coming to San

22 Diego and living part time. They asked me what I thought my

23 wife would think about it. And I told them that I would love

24 to, I would talk to her and see what she thought about it and

25 get back to them. And Tony told me -- he said: If you come


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 942



1 out here, we will hang out and have a good time and make a

2 little money while you are out here.

3 Q Did you decide to go?

4 A Yes.

5 Q When did you go?

6 A I moved out it was either the very end of January 2002 or

7 the 1st of February. It was -- all I can remember about it,

8 it was on Super Bowl Sunday that I moved out there.

9 Q Once Mr. Royer arrived in San Diego, was there any

10 announcement that was made on the AP site?

11 A Yes.

12 Q What was announced?

13 A That -- I believe the name that was used Shag was going

14 to handle all investigations for Mr. Elgindy.

15 Q Who was Shag?

16 A Shag was Mr. Royer.

17 Q Is that a name he used?

18 A Part of a name that he used.

19 Q What name did he use?

20 A He went by the name on his e-mail sometimes, Boliver

21 Shagnasty.

22 Q When the announcement was made on the site, the reference

23 was to Shag?

24 A Yes.

25 Q Do you know why Mr. Royer wasn't mentioned by name?


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 943



1 A I don't know.

2 Q I'm going to show you GX DC-279, a chat log for January

3 22nd, 2002. Please read the highlighted portions.

4 A At 14:51 Anthony Pacific states: Shag is now responsible

5 for all investigation coordination, any photos of any

6 companies and any info that is relevant to any open calls go

7 to him. He will handle all info and data. Shag is a member.

8 Q And "Shag is a member" is a response to the question at

9 14:52 "who is Shag"?

10 A Yes.

11 Q Once you arrived in San Diego, where did you live?

12 A Jeff and I lived in a condo on the beach and actually in

13 Encinitas which was a town north of San Diego.

14 Q Who paid the down payment on the apartment?

15 A Mr. Elgindy.

16 Q Did you pay him back?

17 A Yes.

18 Q In whose name was the lease?

19 A Mine.

20 Q Who paid the rent?

21 A Jeff and I and Mr. Elgindy.

22 Q Mr. Elgindy paid part of the rent?

23 A Yes.

24 Q What portion of the rent?

25 A I think it was 500. I think Jeff and I each paid a


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 944



1 thousand and Mr. Elgindy paid 500.

2 Q In connection with Mr. Royer's employment, what was the

3 financial relationship that he had with Mr. Elgindy?

4 A Mr. Elgindy had set up an account which we called it the

5 C account and put money in the account for Mr. Royer to trade.

6 Tony wanted Jeff basically to follow his trades, follow his

7 calls and the profits that were made in that account, in the C

8 account, were to go to Jeff.

9 Q How do you know this?

10 A It was explained to me when I was in the office on

11 multiple occasions.

12 Q By who?

13 A Mr. Royer.

14 Q Now, did the setup of this account change your financial

15 relationship with Mr. Royer?

16 A Yes.

17 Q How?

18 A We no longer had the 50/50 split, I mean, he had his own

19 money to trade now, he didn't need my capital to put trades

20 together.

21 Q Now, turning back to the new investigation of Mr. Elgindy

22 that you described before, you testified earlier that

23 Mr. Royer told you that he would monitor this investigation?

24 A Yes.

25 Q Did Mr. Royer tell you what he did to monitor this


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 945



1 investigation?

2 A While he was an agent or afterwards?

3 Q First, while he was an agent.

4 A While he was an agent he was just going to pay attention

5 to the files, see if there were any new updates and let me

6 know if there were.

7 Q Was there anything else that Mr. Royer said that he would

8 do in that regard?

9 A Not that I can recall.

10 Q Did Mr. Royer tell you whether he was going to call

11 anybody in the Department of Justice?

12 A Yes, yes, he did.

13 Q What did he tell you he was going to do?

14 A He was going to call an individual in the Department of

15 Justice that was somehow related to the file and talk to this

16 person to see if any new information that they knew about had

17 come up because, again, he was planning on going to work for

18 Mr. Elgindy and wanted to make sure everything was safe before

19 he actually took the job.

20 Q Is that what Mr. Royer said before he made the contact?

21 A Yes.

22 Q Did he speak with Mr. Royer again after he did so?

23 A Yes.

24 Q What did you say and what did he say?

25 A He called me, I asked him how the call went, he said that


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 946



1 the call went fine. And I said: So do you have the green

2 light to go and work for Mr. Elgindy? And he said: Well, I

3 guess I do. And I said: Well, did the guy give you his

4 blessing? And he goes: Well, no, not really but he didn't

5 oppose me going to work for Mr. Elgindy either so I guess it's

6 okay.

7 Q After Mr. Royer left the FBI, did you and he continue to

8 discuss this new investigation of Mr. Elgindy?

9 A Yes.

10 Q How often?

11 A Probably once a week or so.

12 Q Did you ever discuss it in Mr. Elgindy's presence?

13 A No.

14 Q Did you ever hear Mr. Royer tell Mr. Elgindy about this

15 investigation?

16 A No.

17 Q How did you feel about working in Mr. Elgindy's office

18 knowing that he was being investigated?

19 MR. BERKE: Objection.

20 THE COURT: Sustained.

21 Q Did there come a time when you discussed with Mr. Royer

22 the fact that you were working in Mr. Elgindy's office while

23 knowing that he was being investigated for this new thing?

24 A Yes.

25 Q What did you say to Mr. Royer?


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 947



1 A I told Mr. Royer that it was weird being in the office,

2 that I actually felt a little guilty because, you know, I'm

3 sitting five feet away from Mr. Elgindy, we are having a good

4 time in the office at this time and knowing that he is being

5 investigated for this and he has absolutely no idea as far as

6 I knew so I felt really weird about it.

7 Q Did Mr. Royer respond to what you said?

8 A Yes.

9 Q What did he say?

10 A He agreed with me that it was a weird situation.

11 Q Did he say anything else?

12 A He also stated that he had told Mr. Elgindy a little bit

13 about the investigation but that Mr. Elgindy did not know the

14 specifics of it.

15 Q In this time period, did Mr. Royer provide you with

16 additional information regarding this new investigation of

17 Mr. Elgindy?

18 A Yes.

19 Q Did Mr. Royer say where he got the information?

20 A Yes.

21 Q Where did he say he got the information?

22 A From Lynn Wingate.

23 Q Anywhere else?

24 A A bit of the information that he had given me was

25 something that he remembered that he had read while he was


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 948



1 still an FBI agent.

2 Q Read where?

3 A In the file.

4 Q Did there come a time where you overheard a phone call on

5 the subject?

6 A Yes.

7 Q Did you hear the whole call or part of the call?

8 A Just part of the call.

9 Q Do you know who Mr. Royer was speaking with?

10 A Yes; he was speaking to Lynn Wingate.

11 Q Which side of the conversation did you overhear?

12 A I overheard his side of the conversation.

13 Q What did you hear Mr. Royer say?

14 A I heard him say Matt Tyson's name. I heard him say my

15 last name. I heard him say the name of my fund. And I think

16 that's what I can remember him saying. I think that was it.

17 Q What was the name of your fund?

18 A Brezido.

19 Q What kind of fund was it?

20 A It was a small hedge fund.

21 Q What did you do after the call?

22 A After Jeff got off the call, I asked him what was going

23 on. I could tell during the phone call that he was worried,

24 wasn't a good phone call. I asked him when he hung up, you

25 know, what's going on. And he said: Well, that was Lynn and


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 949



1 she told me to pack my shit and get as far away from Tony as

2 quickly as I can.

3 Q Did Mr. Royer say why it was that she was giving that

4 advice?

5 A He said that there was a new entry into the file and that

6 Lynn was crying and was very concerned.

7 Q What did Mr. Royer tell you about the investigation at

8 this time?

9 MR. BERKE: Objection.

10 THE COURT: Let me speak to you at the side bar.

11 (Continued on the next page.)

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STEPHANIE DREXLER, RPR
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Cleveland - direct - Breen 952



1 (In open court.)

2 BY MR. BREEN:

3 Q Mr. Cleveland, during this discussion with Mr. Royer

4 after his telephone conversation with Ms. Wingate, did

5 Mr. Royer tell you that you, Mr. Royer and Mr. Elgindy were

6 the focus of the investigation?

7 A Yes.

8 Q What did he say the focus was of this specific part of

9 the investigation?

10 A Insider trading.

11 Q Were you concerned about this development?

12 A Yes.

13 Q Was there anything that partially alleviated your concern

14 in that regard?

15 A Yeah, a couple of things. When Jeff was explaining to me

16 what was going on, he downplayed it a little bit like it

17 wasn't that big of a deal. Also, some of the information that

18 he gave me about what some people said was incorrect and so I

19 thought that, well, you know, maybe it's not as bad as it

20 seems.

21 Q Specifically did Mr. Royer tell you that somebody had

22 made a claim that Mr. Royer had arrested you for your drug

23 offense in 1991?

24 A Yes.

25 Q Was that correct?


STEPHANIE DREXLER, RPR
OFFICIAL COURT REP0RTER



Cleveland - direct - Breen 953



1 A No.

2 Q The fact that your last name was mentioned, was that

3 something that led you to be partially alleviated in your

4 concern?

5 A Yes.

6 Q Did Mr. Royer tell you whether the person who had

7 reported possible activity by you had known your first name --

8 sorry, your last name?

9 A Yeah, the person who reported it did not know what my

10 last name was.

11 Q So when Mr. Royer was saying Cleveland, he was filling in

12 the last name of what was not known from the report?

13 A Correct.

14 (Continued on the next page.)

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STEPHANIE DREXLER, RPR
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Cleveland - direct - Breen 954



1 DIRECT EXAMINATION (CONT'D.)

2 BY MR. BREEN:

3 Q After this call did you notice any change in Mr. Royer's

4 demeanor?

5 A Yes.

6 Q What change did you notice?

7 A He seemed more depressed, not real happy, again, like

8 something was weighing heavily on him.

9 Q Now, during this general time period did Mr. Royer

10 provide you with additional information regarding this new

11 investigation?

12 A Yes.

13 Q Did Mr. Royer say anything about potential freezing of

14 accounts?

15 A Yes.

16 Q What did he say about that?

17 A That for me not to be surprised that if any -- on any

18 given day in the very near future that Mr. Elgindy's accounts

19 were frozen.

20 Q Did Mr. Royer say anything about phone lines being

21 tapped?

22 A Yes.

23 Q What did he say about that?

24 A He told me that each time that I was on the office phones

25 at Tony's office or if I was on the phone with Mr. Elgindy at



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 955



1 his house or on his cell phone that I needed to make the

2 assumption that the government was listening to me because

3 from what he understood, all of Mr. Elgindy's lines were wire

4 tapped.

5 Q Did Mr. Royer say anything about the imminency of the

6 investigation?

7 Let me ask that a different way.

8 Did Mr. Royer express whether he thought anything

9 was going to happen soon?

10 A Yes, his exact words was that the noose was tightening

11 around Mr. Elgindy's neck.

12 Q Did Mr. Royer say anything about a business called Red

13 Sea?

14 A Yes.

15 Q What did he say about that?

16 A In the conversation when we were talking about frozen

17 accounts I asked him -- I made the comment I wonder where all

18 Tony has accounts and he said that he remembered one that he

19 had read about in an FBI file that was called Red Sea that was

20 in Costa Rica.

21 Q Now, before the Wingate call what was yours and

22 Mr. Royer's plan with regard to staying in California?

23 A We were going to stay -- I believe our lease was up in

24 late June, early July, and we were going to stay until the end

25 of the lease and then go our separate ways.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 956



1 Q After the call was that a plan that changed?

2 A Yes.

3 Q How did it change?

4 A We were going to leave California as quickly as possible.

5 Q Was the information that was provided by Ms. Wingate

6 something that contributed to that decision?

7 A Yes.

8 Q When did you leave?

9 A I left towards the end of April 2002.

10 Q When did Mr. Royer leave?

11 A Mr. Royer, I think that Mr. Royer left a week after me.

12 Q Did Mr. Royer tell you what his plans were after leaving

13 California?

14 A Yes.

15 Q What did he say his plans were?

16 A He was going to go to Albuquerque, New Mexico where Lynn

17 Wingate was and stay with her. He told me that she was in the

18 process of leaving the Bureau and that when she left the

19 Bureau, they were going to move to Colorado and purchase a

20 home.

21 Q Now, before you left, while you were in San Diego did you

22 have the occasion to observe the operation of Mr. Elgindy's

23 business and personal affairs?

24 A Yes.

25 Q Did Mr. Elgindy keep cash on hand in the office?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 957



1 A Yes.

2 Q Did you see him with large amounts of cash?

3 A Yes.

4 Q During what time period?

5 A During just different times, the whole time that I was

6 out there, from, again, the 1st of February till towards the

7 end of April.

8 Q Were there times when you witnessed him handling large

9 amounts of cash?

10 A Yes.

11 Q Describe those examples?

12 A On one occasion he had two what I call bricks of hundred

13 dollar bills, it was hundred dollar bills that were stacked

14 up, rubber banded together real tightly and he was sitting in

15 the office and juggling them up and down, throwing one up in

16 the air, catching it, throwing another one up in the air and

17 catching it. I asked him how much it was and he told me that

18 each stack was $100,000.

19 Q Where did he keep this cash?

20 A I know that sometimes he kept it -- he had a safe in the

21 office and he put the money in the safe.

22 Q Was there another time that you saw him handling a brick

23 of cash?

24 A Yes.

25 Q Tell us about that.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 958



1 A Same deal, he just had the -- he told me that it was

2 $100,000, again, a similar brick to what I had seen before.

3 He just had it on his desk and was just flipping it over and

4 over, just kind of tumbling it around and that was it.

5 Q Was Mr. Royer paid while you were in San Diego?

6 A Yes.

7 Q Do you remember how it was that he was paid?

8 A He was paid in cash.

9 Q Do you remember how much?

10 A The time that I knew he got paid he was paid $6,000.

11 Q How do you know about it?

12 A We were getting ready to go to the airport, Jeff was

13 leaving, I was going to ride with him, then drive his car

14 back. When we were leaving Tony's office Jeff stopped and

15 said, oh, I forgot to get money from Tony. He went back

16 inside, was inside for about 15 minutes, came back out and had

17 a white envelope full of cash and I asked him, I said how much

18 did he give you and he said $6,000. And then he started

19 complaining how he had to argue with Tony to get that amount

20 from him that Tony wanted to give him much less than that.

21 Q Now, while you were at Mr. Elgindy's office did you ever

22 meet his probation officer?

23 A Yes.

24 Q How many times?

25 A I met her once at the old office and I met her once at



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 959



1 the new office.

2 Q Do you remember her name?

3 A I think her name was Lori.

4 Q Was there a time when you overheard a conversation

5 between her and Mr. Elgindy regarding Lebanon?

6 A Yes.

7 Q What did you hear her say and what did you hear

8 Mr. Elgindy say?

9 A Mr. Elgindy was wanting to go to Lebanon on vacation,

10 because he was on probation it had to be approved and she

11 informed him that for some reason it had not been approved and

12 Mr. Elgindy asked her, again, if she knew why and she said she

13 had no idea.

14 Q After she left what did Mr. Elgindy say about it?

15 A Mr. Elgindy asked Mr. Royer what would happen if I just

16 took off and went over there, you know, without permission and

17 Jeff said, well, you know, you'd be in violation of your

18 probation, a warrant would probably be put out for your arrest

19 but he goes, but I don't know that they'd make a big deal out

20 of it.

21 Q Do you remember whether Mr. Elgindy used the word "fled"?

22 A Yes.

23 Q Did he?

24 A Yes.

25 Q What would happen if he just fled?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 960



1 A Yes.

2 MR. BERKE: Objection, the testimony is the

3 testimony.

4 THE COURT: Go ahead, counsel, you may inquire by

5 way of clarification. Go ahead, next question.

6 Q What did Mr. Elgindy say about fleeing?

7 A When he asked Mr. Royer after he found out that the

8 Probation or the probation officer denied him going, his exact

9 words to Mr. Royer were, what would happen if I just fled over

10 to Lebanon, would anyone do anything about it. And that's

11 when Mr. Royer informed him that you'd be in violation of

12 probation, a warrant would be issued for your arrest but I

13 don't know that they'd really do anything about it or make

14 that big of a deal out of it.

15 Q Did Mr. Royer make any comment at this time about the

16 likelihood of success in that regard?

17 MR. BERKE: Objection.

18 THE COURT: Do you recall Mr. Royer saying anything

19 else?

20 THE WITNESS: Yes, he said other things too.

21 THE COURT: About this subject?

22 THE WITNESS: Yes.

23 THE COURT: Go ahead. What else did he say?

24 THE WITNESS: Out of Mr. Elgindy's presence he told

25 me that he didn't think Tony would make it very far because he



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 961



1 was sure that every border, every airport probably had his

2 name flagged and that he was being watched and he thought that

3 they would probably grab Elgindy before he got out of the

4 country.

5 Q Now, in this time frame did Mr. Elgindy say anything else

6 about Lebanon?

7 A Yes, told me that Lebanon had the best bank secrecy laws

8 in the world.

9 Q Where were you when that came up?

10 A At a gas station in Ensenedas.

11 Q Prior to that comment were you with Mr. Elgindy anywhere?

12 A Yes.

13 Q Where?

14 A Bank of America.

15 Q Did you witness him doing anything while you were there?

16 A Yes.

17 Q What did you witness him doing?

18 A Wiring money.

19 Q Did Mr. Elgindy tell you how much it was?

20 A No.

21 Q Do you know where Mr. Elgindy wired the money?

22 A To Lebanon.

23 Q Did you ask him why he wired the money to Lebanon?

24 A Yes.

25 Q Is that when he made the comment about Lebanon's bank



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 962



1 secrecy laws?

2 A Yes.

3 Q Did you talk to Mr. Elgindy about his prior travel to

4 Lebanon?

5 A Yes.

6 Q Did he say whether he had bought property there?

7 A Yes.

8 Q What did he say?

9 A He said that he had bought a home on the beach, I think

10 it was the Mediterranean is what he said, that he had a home

11 over there.

12 Q In this discussion did Mr. Elgindy show you anything?

13 A Yes.

14 Q What did he show you?

15 A He showed me a small gold, what appeared to be a credit

16 card or debit card.

17 Q What did he say about it?

18 A He said that with this card, this is how he accessed his

19 money that was in the banks in Lebanon. He showed me the card

20 and showed me that it had no name on the card, just a bunch of

21 numbers and so nobody would ever know, you know, whose it was,

22 the government couldn't trace it or anything but the card was

23 how he accessed the money over there.

24 Q Now, in this general time frame did Mr. Elgindy mention

25 John Liviakis again?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 963



1 A Yes.

2 Q Do you remember how it was that it came up?

3 A Yes.

4 Q How did it come up?

5 A He and I were sitting in the office together, Mr. Royer

6 was not present, and Mr. Elgindy asked me if I thought it was

7 possible for John Liviakis to have the US government bring

8 RICO charges against not only him but the site and, you know,

9 I responded that I didn't think they could, you know, but the

10 question kind of caught me off guard.

11 Q Now, during this time frame did Mr. Elgindy make any

12 comments about wanting to change his lifestyle?

13 A Yes.

14 Q What did he tell you?

15 A A couple of things. He asked me one day what was -- what

16 kind of car should he buy that was like a bland car, a car

17 that a lot of people have, a car that a person would not stick

18 out in the car and I told him, I said, well, you know, Ford

19 Taurus is a really popular car. I was like, why do you want

20 to buy something like that. He goes, I want out of the lime

21 light, I want to be able to go places, nobody look at what I'm

22 driving, nobody know who I am.

23 And also he during that time period he was wanting

24 to close down Inside Truth.com, either close it down or give

25 it to somebody else. He didn't want any more exposure as far



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 964



1 as being associated with Inside Truth.com.

2 Q Now, during this time period did you become aware that

3 Mr. Royer had taken other files from the FBI when he left his

4 employment there?

5 A Yes.

6 Q When approximately was this?

7 A When did I learn about the files?

8 Q Yes.

9 A That would have been around March, I believe it was

10 sometime in March of 2002.

11 Q What did Mr. Royer say about the other files?

12 A He told me that the other files were files that he had

13 taken regarding -- the files were connected to an

14 investigation that had taken place in Oklahoma City while he

15 was an agent in Oklahoma City that had involved an informant

16 from the DEA, that the investigation -- he said that the files

17 showed that the investigation was handled improperly, that

18 that DEA agent was left -- as he put it, hung out to dry and

19 that he wanted to expose the FBI for their failure to

20 investigate this correctly.

21 Q Did he say whether or not there was a terrorism aspect to

22 that investigation?

23 A Yes.

24 Q What did he say?

25 A He said that -- he named a couple of carpet stores in



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 965



1 Oklahoma City that I am familiar with that he thought that

2 there was a terrorist connection to them, that there was also

3 a drug connection, that they were bringing in their rugs from

4 Canada and the rugs, a lot of the rugs were filled, the rolls

5 were filled with drugs and this is what it was being

6 investigated for.

7 Q Did he say whether the documents were classified or

8 secret?

9 A No, he did not.

10 Q Not that you remember?

11 A Not that I can remember.

12 Q Did Mr. Royer tell you what he was going to do with these

13 files?

14 A Yes.

15 Q What did he tell you he was going to do with them?

16 A He was going to take the files to Dateline and go over

17 the files and his story with a Dateline producer to see if

18 they were interested.

19 Q Did Mr. Royer say whether he was going to ask for

20 anything in return?

21 A Yes.

22 Q What did he say he was going to ask for?

23 A He was going to ask for money in return.

24 Q How much?

25 A $600,000.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 966



1 Q Did Mr. Royer say whether he had discussed this plan with

2 anybody?

3 A He had talked about the plan with Ms. Wingate.

4 Q Did he say what she said about it?

5 A She told Mr. Royer that if they didn't pay him anything

6 for the information, that he should just get up and walk out.

7 Q Did Mr. Royer express whether he agreed with that view?

8 A He did agree with that view, yes.

9 Q Why Dateline as opposed to some other news source?

10 A Jeff had access to a Dateline producer.

11 Q How did he have access to a Dateline producer?

12 A Jeff had been spending time with a lady in Los Angeles

13 who was the editor of the show Everybody Loves Raymond and she

14 knew a lot of people; Jeff told me that he told her a little

15 bit of the story, what he wanted to do. She told Jeff that

16 she knew a producer over at Dateline and she would set it up

17 for him to talk to this producer.

18 Q Did Mr. Royer say whether the files were in his

19 possession?

20 A Yes, he did tell me that actually Ms. Wingate had the

21 files and was going to bring them to him.

22 Q In this time frame did Ms. Wingate visit Mr. Royer?

23 A Yes.

24 Q Did Mr. Royer tell you why she was visiting him?

25 A Yes.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 967



1 Q Why?

2 A The FBI had purchased a surveillance van from a company

3 in San Diego and she was flying out to San Diego to pick up

4 the van and drive it back to Albuquerque

5 Q Where did Ms. Wingate stay when she was in San Diego?

6 A At the condo.

7 Q Do you know whether she delivered the files?

8 A Yes, she did.

9 Q How do you know?

10 A Jeff showed them to me.

11 Q Did you see her hand them to him?

12 A No.

13 Q But Mr. Royer had them after Ms. Wingate left?

14 A Yes.

15 Q Did there come a time when Mr. Royer told you he was

16 traveling to see the people at Dateline?

17 A Yes.

18 Q How soon after Ms. Wingate's visit?

19 A I think it was the very next day or maybe the day after,

20 it was within just a couple of days of her visit.

21 Q Did you see Mr. Royer before he left?

22 A Yes.

23 Q Did you talk to him?

24 A Yes.

25 Q Did he tell you where he was going?



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



Cleveland - direct - Breen 968



1 A Yes.

2 Q What did he say?

3 A He said that he was going up to L.A. to see this Dateline

4 producer, if things went well he may not be back for a couple

5 of days, but if they didn't pay the money then he might be

6 back in a few hours.

7 Q When did he return?

8 A He returned that evening.

9 Q Did you talk to him when he returned?

10 A Yes.

11 Q What did he tell you?

12 A I was kind of giving him a hard time because he had been

13 gone all day and he told me that he had talked to the producer

14 at great length and I said, hold on, I thought you weren't

15 going to, you know, give these guys anything, you know, unless

16 they paid you money and he said, well -- he goes, I found out

17 Dateline doesn't pay money for their information. The

18 producer explained to him that if they paid money for their

19 information, they'd have no credibility.

20 Q Did Mr. Royer say how long the meeting lasted?

21 A Yes, he said it lasted approximately six hours.

22 Q Did Mr. Royer say whether he had left the files or not?

23 A No, he did not. He did not say.

24 MR. BREEN: Your Honor, I would be about to start a

25 new topic.



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



969



1 THE COURT: Not today, monsieur.

2 We're going to suspend for the day. We expect to

3 finish the direct testimony of this witness in the morning.

4 Have a pleasant evening. Do not discuss the case. Remain

5 vigilant, folks, please about news accounts, turn your

6 attention away from them. Have a good night.

7 THE CLERK: All rise.

8 (Jury leaves courtroom.)

9 THE COURT: When do you think you're going to wrap

10 this up?

11 MR. BREEN: Probably in maybe an hour tomorrow.

12 THE COURT: All right. Who is up first with this

13 chap?

14 MR. BERKE: I am.

15 THE COURT: Okay. What are you going to be, about a

16 half hour or so?

17 MR. BERKE: Something like that.

18 (Proceedings adjourned as above set forth.)

19

20

21

22

23

24

25



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



970



1 I N D E X

2 WITNESS PAGE

3

4 D E R R I C K C L E V E L A N D

5 DIRECT EXAMINATION (CONT'D.) 797

6 BY MR. BREEN

7

8 E X H I B I T S

9 PAGE

10

11 Government Exhibit 3016 in 845

12 evidence

13 Government Exhibit 3026 in 849

14 evidence

15 Government Exhibit 3017 in 853

16 evidence

17 Government Exhibit 3027 in 854

18 evidence

19 Government Exhibit 3028 in 858

20 evidence

21 Government Exhibit 3018 in 863

22 evidence

23 Government Exhibit 3031 in 863

24 evidence

25 Government Exhibit 3030 in 870



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER



971



1 evidence

2 Government Exhibit 3034 in 921

3 evidence

4 Government Exhibit 3003 in 929

5 evidence

6 Government Exhibit 2122 840

7 Government Exhibit 1205 A 883

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25



HOLLY DRISCOLL, CSR
OFFICIAL COURT REPORTER
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